Kathmandu. The Independent Power Producers Association of Nepal (IPPAN) has submitted 24-point suggestions for revenue, tax and policy arrangements for the upcoming fiscal year 2082/83. The suggestions given by IPPAN include tax exemption for 15 years for energy projects including hydropower until they reach 28,500 MW of electricity generation, only 1 percent customs duty should be levied on machinery and equipment imports, zero percent tax on electricity sales and electricity should be included in the VAT-taxable items, customs exemption on explosives, which is only available to government projects, should be granted to private projects, land quota exemption should be granted, and local governments should not be allowed to collect taxes under other headings.
The tax exemption period should be kept at a minimum of 15 years and the tax rate should be 10 percent, and arrangements should be made for energy entrepreneurs to get loans at low interest rates.
A tax of one percent should be levied on the import of machinery and machinery parts and steel pipes for the maintenance of operating hydropower projects. The system of fully exempting the import tax by charging a percentage of customs duty should be maintained until the fiscal year 2078/079.
By removing the current system of capitalizing the tax on the project construction cost through the VAT deduction or refund method and immediately imposing zero VAT on the local sale and export of electricity, the customer price will not increase and the tax cost on project construction will also be reduced, making the electricity produced in Nepal cheaper and more competitive. Therefore, the sale of electricity should be regulated as a VAT-taxable item.
The system of fully exempting power projects for 15 years and 50 percent for an additional 5 years until they reach 28,500 MW of electricity production should be continued. .
Customs rates should be reduced on imports of materials and equipment required for project construction and customs procedures should be simplified and expedited to make projects more effective.
Provision should be made to allow temporary export of raw materials of any item for processing or producing or manufacturing any item from it or repairing any item or for any other purpose by taking cash deposit or bank guarantee and with the approval of the Department of Power Development.
The VAT rate applicable to supplies and services of hydroelectric projects and equipment should be reduced.
Explosives that are only being received by government projects The customs exemption facility for goods should be extended to private hydropower projects and brought down to a 1 percent customs rate.
A tax exemption should be provided for all expenses incurred in the regular maintenance and operation of hydropower projects.
Since the project is to invest in the development of the local area, there should be a legal provision that local bodies should not be allowed to charge tax exemptions.
A compensation should be provided for the use of government land up to the area mentioned in the approved EIRIE report and there should be no limit on the purchase of private land.
A provision should be made for the approval of the EIA: IEE study and its implementation by the concerned ministry. .
There should be uniformity in the provisions of ROE in all projects, small and large.
Simplification of documents to be submitted, keeping in mind the universal problem.
The provision of penalty should be removed as there is a situation where fines have to be paid when income is decreasing due to the impact of climate change and other external factors.
While those who consume more electricity are charged more, those who consume more electricity should now be charged less .
Even if the transmission line constructed by other organizations is connected to the substation, metering should be arranged at the place where it is connected.
Facilitation should be arranged to deliver construction power to the project site.
When the project has to pay the amount in exchange for the land that is to be compensated to the Government of Nepal, the minimum rate set by the Land Revenue in that area should be maintained.
When determining the value of land in relation to land acquisition and right of way, the minimum rate set by the Land Revenue in that area should be maintained .
After the financial management of the project, there should be a provision for spending based on the progress of the project.
The provision of Sub-section 3 of Section 8 of the Value Added Tax Act should not be amended and applied to projects based on the boot model.
All construction materials imported from foreign countries for solar power projects should be exempted from VAT and customs duty, just like hydropower projects.
To attract the private sector in storage and pumped storage projects, the license period should be 75 years, royalty and income tax exemptions up to 25 years, and appropriate A PPA rate that provides returns needs to be determined.
