EV Tax Structure in Nepal Shifted from Motor Power to Vehicle Price

Finance Minister Dr. Swornim Wagle, while presenting the national budget for fiscal year 2026–27 in the federal parliament, announced that the government has overhauled the taxation system for electric vehicles, replacing the existing motor power (kilowatt)-based structure with a price-based framework.

Previously, EV taxes were applied under a tiered system based on motor capacity, with slabs ranging from 0–50 kW, 51–100 kW, 101–200 kW, 201–300 kW, and above 300 kW.

Under the revised policy, taxation will now be determined by the vehicle’s purchase price, shifting the basis from technical motor output to actual market value.

He stated, “I have arranged for customs duties on electric vehicles, which were previously based on peak power capacity, to now be levied on a value-based system. In addition, a clean infrastructure investment fee has been introduced at the point of import to support domestic production of such vehicles, as well as the development of charging stations and battery management systems.”

The change comes after years of debate over the effectiveness of the kW-based classification system. The Office of the Auditor General had previously raised concerns about inconsistencies in the framework and recommended establishing clearer standards for measuring motor capacity, along with exploring alternative approaches such as value-based taxation.

In a similar line of feedback, both the Department of Transport Management and the Department of Customs had suggested adopting a system based on vehicle price and size, arguing it would improve transparency and create a more practical tax structure.

Following internal evaluations and high-level consultations within the Ministry of Finance, the government has now formally implemented the price-based taxation model for electric vehicles.