Import Clearance Process & VAT Exemptions in Nepal (2025 Guide)

Importing goods into Nepal involves navigating a structured legal process governed by the Customs Act 2064 and the Value Added Tax (VAT) Act 2052. For businesses, understanding the clearance procedure and knowing which goods are exempt from VAT can make the difference between a profitable venture and a logistical nightmare.

This guide outlines the 2025 import clearance process and provides a clear list of VAT-exempt goods.

The Import Clearance Process: Step-by-Step

Nepal uses the ASYCUDA World system, a digital platform that has streamlined much of the paperwork. However, the physical verification and documentation requirements remain strict.

Step 1: Pre-Import Preparation

Before your goods even ship, ensure you handle these basics:

1. EXIM Code: You must obtain an Export-Import (EXIM) Code from the Department of Customs. This requires a bank guarantee of NPR 300,000 for trading concerns (revised in Finance Bill 2081).
2. Letter of Credit (LC): For payments exceeding certain limits (typically $30,000 for TT), opening an LC is mandatory under Nepal Rastra Bank regulations.

Step 2: Documentation (The “Pragyapan Patra”)

When goods arrive at the customs point (Tribhuvan International Airport, Birgunj, Bhairahawa, etc.), you must submit the Customs Declaration Form (Pragyapan Patra). Required documents include:

• Commercial Invoice
• Packing List
• Certificate of Origin
• Bill of Lading / Airway Bill
• Insurance Policy
• BiFO (Banking Instrument for Payment)

Step 3: ASYCUDA Entry & Assessment

Your customs agent fits the data into the ASYCUDA World system.

• HS Code Classification: The customs officer validates the Harmonized System (HS) Code. This is the most critical step. If you declare a “Computer Part” (5% duty) but customs classifies it as a “Consumer Electronic” (15% duty), you will face fines.

Step 4: Physical Inspection & Clearance

Depending on the Risk Management System (RMS):

• Green Lane: Document verification only (fast).
• Red Lane: Full physical inspection of goods. Once duties (Customs + VAT + Excise) are paid into the bank counter at the customs office, a Release Order is issued.

VAT Exemptions: Schedule 1 of the VAT Act 2052

Not all imports attract the standard 13% VAT. Section 5(3) of the VAT Act (Schedule 1) lists goods and services that are tax-exempt. Importing these can significantly lower your costs.

1. Basic Agricultural Products

Government policy encourages low food prices. Exemptions include:

• Cereals: Paddy, rice, wheat, maize, millet (unpacked or basic packing).
• Fresh Vegetables & Fruits: Fresh potatoes, onions, tomatoes, and other green vegetables. Note: The Finance Act 2081 explicitly removed the VAT on potatoes and onions that was introduced in the previous year, returning them to the tax-exempt list.
• Pulses & Legumes: Unprocessed lentils and beans.

2. Live Animals & Farming Inputs

• Live goats, sheep, yaks, and poultry.
• Agricultural tools: Spades (Kodalo), sickles, ploughs.
• Seeds and manure/fertilizers.

3. Medical & Educational Goods

• Medicines: Human and veterinary medicines approved by the Department of Drug Administration.
• Books: Textbooks, newspapers, and magazines.

4. Basic Daily Necessities

• Kerosene oil.
• Salt.
• Firewood and charcoal.

5. Transport & Specific Services

• Public transportation services (Bus, Air travel).
• Educational services (Schools/College fees).

Common Pitfalls to Avoid in 2025

1. Undervaluation: Declaring a lower value ($10 for a $50 shoe) is the most common offense. Customs maintains a “Reference Value Database.” If your invoice is lower than their reference, they will tax you based on their value, not your invoice.
2. Missing Country of Origin: Always ensure the “Made in [Country]” label is visible on products.
3. Ignoring Mandatory Standards: Items like electronics and food products often need additional clearances from the Nepal Bureau of Standards & Metrology (NBSM) or Department of Food Technology.

Pro Tip: Always calculate your landed cost (Item Cost + Freight + Insurance + Customs + Excise + VAT) before placing an order.