KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.

The government has mandated HS codes on VAT bills for imports to enhance tracking and reduce smuggling, with the VAT threshold for service businesses raised to Rs 3 million annually. Tax-exempt pension fund contributions have increased to Rs 500,000 annually, alongside a doubled tax exemption for medical treatment to Rs 1,500.

Gold prices dropped by Rs 400 per tola to Rs 140,500, with silver prices also falling. Prime Minister Dahal inaugurated the 400-kV Hetauda Substation to improve power reliability and facilitate electricity trade with India, costing Rs 3 billion.

The Sikta Irrigation Project reached 92% fiscal progress, aiming to irrigate 42,766 hectares in Banke. The IDA meeting will be held in Kathmandu from June 18 to 21 to discuss global resource mobilization.

The US dollar appreciated against the Nepalese rupee, while other major currencies depreciated. Increased customs duties on sponge iron have raised concerns about hindering industrialization efforts.

Govt mandates HS Code on VAT Bills for imports

The government has mandated traders to include Harmonized System (HS) codes on VAT bills for imported goods.

The mandate for including HS codes on VAT bills for imported goods aims to improve tracking and reduce smuggling. The VAT threshold for service trade businesses has been increased from Rs 2 million to Rs 3 million annually, also affecting joint trade businesses.

However, VAT regulations for transport and merchandise businesses remain unchanged, with mandatory registration for annual transactions over Rs 5 million.

This move reflects an effort to enhance tax compliance while easing the burden on smaller enterprises.

This amendment aims to enhance tracking of imported goods in domestic trade and curb smuggling.

Govt raises tax-exempt pension fund contributions

The government has raised the limit for tax-exempt contributions to pension funds from Rs 300,000 to Rs 500,000 annually.

The government’s increase in the tax-exempt contribution limit for pension funds from Rs 300,000 to Rs 500,000 annually, alongside the rise in the monthly exemption to Rs 41,666, aims to encourage higher savings for retirement, while the doubling of the annual tax exemption for medical treatment to Rs 1,500 provides additional relief, all within a framework of unchanged tax rates and new compliance requirements for traders, effective from the fiscal year 2024/25.

Gold prices dip by Rs 400 per tola

In the domestic market, the price of gold experienced a notable decrease of Rs 400 per tola, with fine gold valued at Rs 141,200 per tola and standard gold at Rs 140,500 per tola on Friday.

This decline from the previous day’s prices indicated a downward trend in the gold market. Moreover, silver prices also witnessed a reduction of Rs 10 per tola, with silver priced at Rs 1,800 per tola.

This decrease in both gold and silver prices suggested a shift in market dynamics, possibly influenced by factors such as changes in global demand, supply fluctuations, or investor sentiment.

It was essential for investors and stakeholders to closely monitor these price movements and consider their implications on the broader economic landscape.

PM Dahal inaugurates 400-kV Hetauda Sub-station

Prime Minister Pushpa Kamal Dahal ‘Prachanda’ inaugurated the 400-kV Hetauda Substation in Thana Bharyang, Hetauda, marking it as the third largest automatic substation in Nepal based on Gas Insulated System (GIS) technology.

This substation, operational since last Friday, along with two other newly constructed substations of 220 kV and 132/11 kV capacities, aims to enhance the reliability and quality of east-west power supply and facilitate electricity trade with India.

The project, a joint investment by the Government of Nepal and Nepal Electricity Authority under the National Electricity Development Decade programme, includes a future connection to a 400-kV double-circuit transmission line from Ratmate through the Millennium Challenge Corporation (MCC) assistance.

The total cost of the substations is estimated at Rs 3 billion, funded by the government, NEA, and a World Bank soft loan.

Sikta Irrigation Project surges forward with 92% fiscal progress

The Sikta Irrigation Project, a national pride initiative, reached 92% fiscal progress in 2023/24, aiming to irrigate 42,766 hectares in Banke district. Engineer Sandesh Poudel noted that over Rs 760 million of the Rs 830 million budget was spent by December 2024, completing key sections and progressing land acquisition.

The 2024/25 budget is over Rs 1.6 billion, focusing on the Daduwa section canal. Launched in 2005/06 and set to finish by 2032/33 with costs over Rs 52 billion, the project faces challenges like inadequate funding and landowner compensation issues, crucial to address for its success.

IDA meeting to take place in Kathmandu from June 18

The International Development Association (IDA) of the World Bank Group is set to convene in Kathmandu from June 18 to 21 for its IDA-21 K meeting.

Hosted in Nepal’s federal capital, this gathering holds significant importance as it will chart the global policy direction on resource mobilization.

At a news conference today at the Ministry of Finance, Finance Secretary Madhu Kumar Marasini provided insights into the upcoming event.

He highlighted that the IDA-21 meeting will play a decisive role in formulating strategies for global resource mobilization.

Foreign currency exchange rates

The Nepal Rastra Bank (NRB) has released Saturday’s exchange rates, showing a significant appreciation of the US dollar against the Nepalese rupee, with the buying rate increasing to 133.40 rupees from 133.38 rupees, and the selling rate rising to 134 rupees from 133.98 rupees.

This surge has corresponded with a depreciation in the value of other major currencies such as the Euro, British pound, and Australian dollar.

Specifically, the Euro’s buying rate dropped from 143.94 rupees to 142.76 rupees, the pound fell from 170.37 rupees to 169.51 rupees, and the Australian dollar decreased from 88.64 rupees to 88.28 rupees.

Similar trends were observed for the Kuwaiti dinar and Bahraini dinar, with minor declines in their exchange rates. This overall shift reflects the dollar’s strengthened position in the foreign exchange market.

Duty hike on sponge iron against industrialization

Businessmen are concerned about the recent increase in customs duty on sponge iron, vital for iron rod manufacturing, saying it hampers industrialization efforts.

The government raised customs duty on imported sponge iron to 2.5% and imposed a 1% duty on previously duty-free scrap iron. This move benefits billet-based industries but makes imports expensive for smelting industries.

Former Finance Ministers, including Dr. Prakash Sharan Mahat, Janardan Sharma, and Surendra Pandey argue that these changes impede industrial progress, emphasizing the need for backward integration for industrialization.

Compiled and prepared by Srija Khanal)

Economic Digest is a daily morning economic digest, basically relatable summations of the most important business news, and happenings from Nepal into easy-to-understand summaries.Top of Form