Car import tax in Nepal: why a vehicle costs double the foreign price

A friend in Sydney sent me a screenshot of a Hyundai Creta listed at around AUD 35,000, roughly Rs 30 lakh. The same car, he had just discovered, sells in Kathmandu for somewhere north of Rs 80 lakh. He wanted to know where the other Rs 50 lakh goes.

Almost all of it goes to the government, and it stacks in a specific order that makes the final number bigger than any single tax rate suggests. Nepal builds almost no vehicles, imports nearly all of them, and taxes that import as one of its largest revenue lines. Here is exactly how the price triples.

The cascade is the whole story

Most people picture the tax as one big percentage. It is actually three taxes applied in sequence, and each later one is calculated on everything before it. That sequencing is what makes the total so much larger than the headline rates.

The order:

1. Start with the landed (CIF) value, the price of the car plus freight and insurance to the border.
2. Add customs duty as a percentage of that value.
3. Add excise duty as a percentage of (value + customs).
4. Add 13% VAT on top of (value + customs + excise).

Because excise is charged after customs, and VAT after both, a 75% excise rate effectively bites on a number that is already 1.8× the original. The cascade, not any single rate, is why a car costs what it costs.

The three taxes, one by one

Customs duty: about 80%. Passenger cars (HS heading 8703) carry a customs duty near 80%, and unlike excise it does not change with engine size (Kathmandu Post). India-origin cars get a small treaty preference, roughly five percentage points off.

Excise duty: 60% to 105%, by engine size. This is the band that swings the price most. The statutory rates were last reset in the 2079/80 budget and carried unchanged since:

The 1500cc-and-up figures are the statutory rates confirmed by NBSM's reproduction of the tariff schedule and the Kathmandu Post's 2022 budget coverage; the lower two bands are as widely reported rather than statute-confirmed. The tariff schedule taxes diesel (compression-ignition) cars separately from petrol, generally at the higher end of these bands, though the exact diesel-specific figures are not cleanly settled in a primary source.

VAT: 13%, on top of everything. The standard 13% VAT applies to the cumulative value after customs and excise, so it is the final compounding layer rather than a tax on the sticker price.

There is also a road-construction or development fee at import, but the exact figure (a fixed per-cc amount in some accounts, a percentage in others) is not cleanly settled in a primary source, so treat it as an extra on top of the cascade below rather than a number to quote.

A worked example: Rs 20 lakh becomes Rs 71 lakh

Take a 1501–2000cc petrol car, the band most family sedans and compact SUVs fall in, landed at Rs 20 lakh. (The rates are sourced above; the arithmetic is a calculation.)

That is Rs 51.19 lakh of tax on a Rs 20 lakh car, about 256% of the landed value, and the dealer margin, road fee, and registration come on top. Run the same cascade on an above-3000cc engine at 105% excise and the total tax climbs to roughly 317% of landed cost, the maximum an academic review of Nepal's vehicle taxes puts on conventional private cars. The smaller the engine, the gentler the multiple, which is exactly the behaviour the slabs are designed to push.

Why the tax is this high

The short answer is revenue. Nepal has no domestic car manufacturing, so vehicles are pure imports, and the state has come to depend on taxing them. Vehicles and auto parts have been the single largest source of customs revenue, around 25% of the total in 2014/15, and together with petroleum account for roughly 40–46% of all customs collection (Kathmandu Post; NUS-ISAS).

A car, in other words, is a rolling tax-collection unit. That also explains the policy tension around EVs: every petrol car swapped for a lightly-taxed EV is a hole in customs revenue, which is why EV rates keep getting rewritten budget to budget.

What the 2083/84 budget changed (and didn't)

The FY 2083/84 budget left petrol and diesel car duties alone. The cascade above is the same one in force since 2079/80.

What it did rewrite was EVs: excise on electric vehicles was abolished, customs set at a flat 20% of value, and a value-based Clean Infrastructure Investment Fee introduced in its place (Kathmandu Post). The full EV picture, including which price bands rose and which held, is in the EV duty-switch post. The gap between an EV's tax and a petrol car's remains large, which is the entire reason the EV market exists in Nepal.

Buying used will not save you

Two myths worth killing. First, there is no current age limit on imported vehicles; the widely-repeated "five-year rule" is not the actual federal rule, though a draft 2025 directive proposes capping imports at under one year old. (A separate 2018 rule bans 20-year-old public vehicles from the road, which is a scrappage rule, not an import one.)

Second, and more important for the wallet: the duty is driven by engine size or value, not by whether the car is new or used. A second-hand import runs through the same cascade. In practice almost all private cars imported into Nepal are brand-new, because the tax structure gives no real break for buying old.

If the on-road cost is the problem, the levers that actually move it are choosing a smaller engine, considering an EV, or questioning whether to own a car at all in a city where a scooter or ride-hailing often wins on total cost.

What you actually need to know

1. The cascade, not any single rate, is why cars cost double. Customs (~80%), then excise (60–105% by engine), then 13% VAT, each charged on the running total, stack to 200–317% of landed cost.
2. Engine size is the biggest lever you control. The jump from a 1500cc to a 3000cc-plus car is a jump from 75% to 105% excise, compounded, which is lakhs of rupees of difference.
3. The 2083/84 budget did not touch petrol cars. It only reworked EVs, which remain the lightly-taxed alternative; the petrol cascade is unchanged since 2079/80.

If you are comparing specific models or weighing petrol against an EV, write to parjanya57@gmail.com.

This post is part of the Nepal Money Basics guide — the big-ticket section — alongside the EV duty-switch and car-loan guides.