CIM praises budget reforms but warns measures risk industrial recovery

BIRATNAGAR: Chamber of Industries Morang (CIM) has issued a detailed response to the government’s annual budget for fiscal year 2026/27. The private sector organisation has praised several reform measures while warning that key tax changes and the omission of strategic projects could undermine industrial recovery.

CIM said the budget contains notable steps on governance and business facilitation, including measures to ease industry renewal, speed up approvals and resolve long‑standing tax disputes. “For the first time in history, aggressive and revolutionary efforts have been made in the budget regarding governance reform, the end of legal hassles, investment promotion, and procedural simplification, which CIM has welcomed with an open heart,” the chamber said.

The chamber highlighted several positive provisions. These include raising the personal income tax threshold to Rs 1 million and reducing the top tax rate by 10 percentage points, replacing lengthy pre‑approval requirements for capacity increases with a notification system and an automated route to be implemented within three months, and a special settlement allowing payment of 1% of assessed tax to clear old disputes. CIM also welcomed the formal recognition of CSR spending under the Income Tax Act.

CIM praised commitments to complete major roads on time, incentives for industries to switch to electric or bio‑briquette boilers, and the creation of a Nepal Enterprise Facility to support start‑ups. The chamber said these measures could help reduce production costs, increase domestic electricity consumption and encourage new entrepreneurship.

Despite these positives, CIM raised a series of concerns it wants the government to correct. The chamber argued that apparent customs and excise concessions are offset by new levies at customs under headings such as green tax and clean infrastructure tax, leaving production costs largely unchanged. It also criticised the introduction of VAT on electricity, saying VAT‑exempt basic industries will be unable to claim credit for VAT paid on power and will therefore face higher effective costs.

CIM warned that the budget’s ambitious revenue target and a plan to raise Rs 410 billion through internal borrowing could squeeze private credit and push up interest rates, constraining industrial investment. The chamber urged the government to extend waiver provisions for fines and arrears to proprietorships and partnership firms registered under Cottage and Small Industries and Commerce offices, not only to companies.

The industry body singled out the Koshi corridor for omission. CIM said the budget makes no provision for bringing the Bathnaha–Biratnagar cargo railway into operation and allocates nothing for the Special Economic Zone in Biratnagar despite a completed DPR for Amarduwa in Sunsari. The chamber warned that a newly imposed 15% excise duty on intermediate ethylene packaging (HS 3923.30.90) risks collapsing domestic packaging producers and increasing costs for cottage and small industries.

CIM also called for broader tax relief in family transfers, legal provisions to allow internal electricity trade under an open access model, correction of the HS code for crude palmolein oil, and immediate cash refunds of VAT incurred by hotels and businesses rebuilding after movement‑related damage.

“We strongly demand the government not to let this budget be limited only to announcements of paper reforms and spreading illusions of relief like in previous years,” the chamber said.

The chamber urged the government to amend the inconsistencies it identified, to include the Biratnagar cargo railway and SEZ infrastructure in budget planning, and said it stands ready to work with authorities to implement the budget and protect private sector interests.