The government has given tax exemptions of Rs 97.56 billion 58 million in various categories in the fiscal year 2081/82. The government has granted exemptions by amending the Customs Revenue, Customs Duty on Import of Goods and the Project and Construction Entrepreneurs and Government Bodies and Excise Act.

The 63rd Report of the Auditor General states that Section 18 of the Finance Act, 2081, provides that the Government of Nepal may reduce, increase or partially or completely exempt the rates of duties, fees, duties or taxes imposed under the prevailing law.

Schedules 4, 5 and 6 of the Customs Duty Act, 2081, provide for full or partial exemption of import duties, and according to the data of the Customs Department's Statistics System (ASIKUDA), an exemption of Rs 85.23 billion 16 million has been granted towards customs revenue. Last year, only Rs 79.87 billion 39 million was exempted. The Accountant General has also pointed out that the Ministry and the Internal Revenue Department have not kept records of exemptions from the Economic Act, including exemptions from internal revenue.

According to the details received from the Ministry of Finance, customs duty of 5.71 billion 3 million has been exempted from import of goods under the SAFTA facility. According to Section 18 (1) of the Economic Act, 2081, the Government of Nepal has amended the Customs Duty Act, 2081 and the Excise Act by a decision of the Council of Ministers, and this decision has exempted 496.3 million rupees this year. The Accountant General has said that the government has not submitted the details of the tax exemptions to the Parliament in a lump sum, but only through ministry-level progress reports.

Amrit Lamsal, spokesperson for the Ministry of Finance, said that the Ministry of Finance will make the decision using the authority granted by the Appropriation Act. ‘In some cases, the Ministry of Finance decides, while in some cases, the Council of Ministers decides,’ he said. The Accountant General has said that the exemption given by the government was submitted to the parliament even though it was through ministry-specific progress.

Article 119, Clause 1 of the Constitution 2072 BS provides for the submission of an annual estimate to the joint meeting of both houses of the federal parliament every year. Article 119, Clause 2, states that while submitting the annual estimate, a statement should be submitted on the amount of expenditure allocated to each ministry in the previous fiscal year and whether the expenditure target was achieved or not. Therefore, the Ministry of Finance has stated that it is being submitted every year.

The Accountant General has also stated that 6.12 billion 7.6 billion rupees have been given to various projects, construction entrepreneurs and government bodies this year as per the terms of the agreement on projects run with foreign aid in Section 18 (2) of the Finance Act and 18 (3). Finance spokesperson Lamsal says that the government is providing exemption facilities according to its priorities. ‘There was an energy crisis until 2/3 years ago.’ "The law is for 5/10 years. Similarly, the government has been giving exemptions for a limited period."

Although tax exemptions are not mentioned when preparing the cost estimate of public construction, the Accountant General has pointed out that when exemptions are given through the master list after the purchase agreement is signed, the construction business is receiving the direct financial benefit rather than the project, and the practice of adjusting such amounts to the cost is also low. Lamsal says that the Accountant General may have said this to prevent misuse. "We are also discussing and studying the impact of giving exemptions," he said.

A former secretary said that the Accountant General cannot say in a vacuum that the construction business is receiving the direct financial benefit rather than the project. He says that the Accountant General should conduct a functional audit of the exempted projects and identify which projects have problems.

The Customs Duty Act, 2081 and the Value Added Tax Act, 2052 have provisions for granting duty and tax exemptions on the recommendation of various bodies of the Government of Nepal. However, the recommending body makes recommendations based on the application without verifying the qualifications of the importer and the goods, and the customs administration also gives duty exemptions based on the recommendation letter in a manner that is contrary to the provisions of the Act, the Accountant General has pointed out.