CNI welcomes budget, says duty cuts and tax relief will boost industry

KATHMANDU: Confederation of Nepalese Industries (CNI) has welcomed the government’s budget for fiscal year 2026/27. It said the package could set a new course for the country’s economy if implemented effectively.

In a press release issued today, CNI said the budget’s emphasis on industrial promotion is likely to boost domestic production and attract foreign investment. The confederation highlighted the government’s decision to reduce customs duties on 273 items to create a single customs layer for finished products and raw materials used by production-based industries, saying this will help make domestic goods more competitive and speed up industrialisation. It also noted the removal of excise duty on 360 items, which it said will lower production costs.

The press statement pointed to measures intended to improve the business environment, including a review of electricity demand charges to enhance competitiveness for production-based industries, discounts on electricity tariffs, and allowing industrialists to mortgage structures built on leased land in industrial estates and special economic zones for banking purposes. CNI said the construction and operation of industrial zones such as Motipur and Mayurdhap by the private sector would encourage private investment.

"The provision for automatic value-added tax (VAT) refunds, the resolution of disputes by paying an additional 1% on disputed taxes, and the arrangement where interest, fines, etc., are not applied is extremely practical. Many industrialists and investors have been entangled in cases for years. This arrangement will provide them significant relief, help them focus on productive activities, facilitate the return of profits and royalties, and the announcement to make returns easier appears to attract foreign investment and play an important role in creating an investment-friendly environment," the press release said.

CNI welcomed the increase in the personal income tax threshold to Rs 1 million and a 10% reduction in the maximum rate, saying higher consumer purchasing power is essential for growth in industry, trade and services. The confederation also supported plans to dissolve and merge certain government bodies to improve efficiency and cut unnecessary spending, and the legal provision that projects approved by the Investment Board will not require further approvals from other agencies.

The umbrella organisation of private sector praised measures intended to mobilise private investment in infrastructure, including the use of alternative development finance funds, offshore bonds, clean energy bonds, diaspora bonds and climate funds. It said employment-linked production zones aimed at labour-intensive industries such as agro-processing, tourism services and light manufacturing could serve as models for expansion and job creation.

CNI further welcomed provisions to improve financial access for small and medium enterprises, including credit protection through a First Loss Recovery mechanism, Business Revival Loans for firms facing capital shortages, purchase guarantees and concessional electricity for private sector green urea production, corporate social responsibility provisions for industrial establishments, and the establishment of the Nepal Enterprise Facility to integrate startups and SMEs into the national enterprise ecosystem.

The confederation also said incentives for resorts and hotels targeting high-value tourists and health tourism branding will strengthen the economy.

However, CNI criticised the budget for not addressing the promotion of quality and the import of quality goods. It urged the government to adopt policies ensuring that productive industries are not constrained by land limits, proposing that industry registration should accept approved project schemes and exempt such projects from land limit provisions.

CNI stressed that effective implementation of the budget is crucial to promote investment and stimulate the economy to meet the government’s 7% growth target for the upcoming fiscal year.