Internet prices in Nepal may increase significantly after the Supreme Court dismissed writ petitions filed by several internet service providers (ISPs) challenging tax assessments related to the Telecommunications Service Charge (TSC) and value-added tax (VAT).
ISPs including Dish Home, Classic Tech, Vianet Communication and Subisu are preparing for possible increases in fixed broadband charges ranging from 50% to 100%, according to the report supplied for this article. The companies say the increases would be needed to address financial liabilities arising from tax assessments and fines accumulated over several years.
The Supreme Court dismissed separate petitions filed by the four ISPs last Tuesday. The companies had challenged tax assessment orders issued by the Large Taxpayers Office concerning TSC and VAT on maintenance charges dating back to fiscal year 2018/19 (2075/76 BS).
The court's decision allows the tax authority to proceed with recovery of the additional taxes and related fines assessed against the companies.
How the broadband maintenance charge became a tax issue
The government introduced the Telecommunications Service Charge on internet services through the budget for fiscal year 2018/19.
According to the supplied report, private internet companies subsequently issued broadband bills under a Cabinet decision and directive that permitted up to 50% of a fixed broadband bill to be allocated as a maintenance charge. The maintenance portion was treated as exempt from TSC.
For example, under a NPR 1,000 monthly broadband bill, an ISP could classify NPR 500 as the internet service charge and another NPR 500 as a maintenance charge. TSC would then be collected and paid on the NPR 500 identified as the internet fee.
The tax administration later disputed the practice, determining that maintenance expenses could not reasonably account for such a large share of the total broadband bill. It concluded that taxes had not been collected on the remaining portion of the bill.
The Large Taxpayers Office subsequently issued demand letters seeking TSC and VAT on the disputed amount, along with monthly fines of up to 5%.
ISPs cite financial liabilities
The ISPs have argued that the Supreme Court's decision places a substantial financial burden on their businesses. They say the liabilities relate to taxes and fines accumulated over the past seven years.
The companies' position is that recovering these liabilities could require them to increase broadband prices. The reported proposed increases range from 50% to 100% for fixed internet services.
The dispute centers on whether the maintenance portion of broadband bills could be treated as exempt from TSC and the resulting tax and penalty liabilities assessed by the tax administration.
The report supplied for this article identifies Techpana as the source of further details on the issue.
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