Kathmandu: In a significant move to support the digital infrastructure sector, the government is set to waive the accumulated penalties levied on the Telecommunications Service Charge (TSC).
Finance Minister Dr Swarnim Wagle will formally announce this policy during the presentation of the national budget for the fiscal year 2026/27 in Parliament at 4:00 PM on Friday.
This decision is aimed at addressing the impracticalities of a tax system initiated by former Finance Minister Dr Yubaraj Khatiwada, which had imposed a 10 percent TSC along with a steep penalty structure. Sources indicate that the government will use the upcoming Financial Bill to provide long-awaited relief to Internet Service Providers (ISPs) by removing fines that have ballooned beyond the industry’s financial capacity.
The dispute stems from a provision that allows for maintenance fees, which can account for up to 50 percent of a fixed broadband service charge, to be exempt from the TSC. There has been a long-standing disagreement between the government and service providers regarding the interpretation of this rule; while ISPs categorize a significant portion of a customer’s bill as maintenance to reduce the taxable amount, the government has often contested these proportions.
Under current regulations, failing to settle these tax dues by the 25th of each month results in a 5 percent monthly fine. Over time, these compounding penalties have led to situations where the total outstanding debt for some companies has grown to five times the original tax amount.
The urgency for legal clarity has been repeatedly highlighted by the Office of the Auditor General, which previously suggested that the government collect over 1.25 billion rupees in outstanding revenue and fines from the sector. The Auditor General’s 63rd annual report pointed out that various service providers have been exploiting legal loopholes within the telecommunications and broadcasting sectors to avoid billions of rupees in state revenue. Consequently, the report advised the government to establish a more transparent and definitive legal framework specifically for internet and maintenance service charges to prevent further revenue leakage and industrial stagnation.
Furthermore, the Auditor General noted inconsistencies in the regulatory oversight provided by the Nepal Telecommunications Authority (NTA). While the Telecommunications Act of 1997 mandates that all service fees must be approved by the regulator, the NTA has reportedly failed to maintain a clear breakdown between bandwidth packages, maintenance fees, and core internet charges when approving tariff rates. This lack of specificity from the regulator has contributed to the ongoing tax disputes, which the government now hopes to resolve by removing the burdensome penalties and providing a clearer roadmap for the future of digital services in Nepal.
Nepal #Budget #Economy #Finance
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