Tourism entrepreneurs demand removal of VAT on air tickets

 Lalitpur, Mar. 19

Tourism entrepreneurs have suggested the government bring down tax rates and introduce waivers in various products and enterprises in order to revive the industry to pre-COVID-19 status.

Speaking at a pre-budget discussion for the upcoming Fiscal Year 2025/26 organised by the Confederation of Nepalese Industries (CNI) in Lalitpur on Tuesday, they demanded a proactive approach in supporting tourism businesses and promoting destinations in the international markets.

CNI's President, Rajesh Kumar Agrawal, said that the government should remove the Value Added Tax (VAT) on air tickets.

Suggesting to make the Nepal Airlines Corporation (NAC) more competitive, he said, "Due to its weakness, foreign airlines have been taking advantage, making Nepal an expensive destination for tourists. To strengthen the national carrier, it is crucial to implement reforms, expand operations, and bring in a strategic partner to enhance its competitiveness in the international market."

Agrawal said that since the European Union included Nepal in its air safety list in 2013, direct air connectivity with European countries has been severed which has been negatively impacting Nepal’s tourism industry for more than a decade.

The CNI said the Visit Nepal Year campaign should only be launched after the development of appropriate infrastructure.

"Nepal should focus on regional markets, particularly India and China, where Buddhist travellers are predominant, and carry out tourism promotion and marketing campaigns accordingly," said Agrawal.

According to him, to promote domestic tourism, a provision should be introduced allowing a family to deduct up to Rs. 100,000 spent on annual domestic travel from their taxable income. Likewise, tourism leave should be institutionalised.

Likewise, General Secretary of the Nepal Association of Tour and Travel Agents (NATTA), Yubika Bhandari, said that as per international standards, the government cannot impose the Value Added Tax (VAT) on air-ticketing. "We are a landlocked country and many areas are still inaccessible by road. In such a situation, imposing VAT on air service can be counterproductive," she said.

The government aims to raise about Rs. 8 billion from the VAT on air ticketing.

Sri Lanka and the Maldives are witnessing a surge in tourist inflow but we are still struggling to meet the pre-COVID-19 targets.

Reform the NAC

Operation and management of the NAC should be made more competitive and at par with international standards by issuing the Initial Public Offering and involving private sector or international expertise in its management, suggested Bhandari.

According to the entrepreneurs, Nepal should begin accepting the local currency of its South Asian neighbours. It will enhance their confidence about making trips to Nepal's tourist destinations.

Radha Krishna Thapa, Executive Director of Airlines Operators' Association of Nepal, demanded a discount on the VAT on aircraft leasing, and VAT waiver on the earnings of foreign currencies by the aviation companies.

Khem Lakai, CEO of the Global Academy of Tourism and Hospitality Education, criticised government's decision to cut down the budget of Himalayan Travel Mart, an effective platform for the promotion of Nepal's tourism destinations and products.

Shiva Adhikari, President of Nepal Association of Rafting Agencies (NARA), said that some rivers need to be preserved and developed for adventure sports like rafting and canoeing. Haphazard development works, hydroelectricity projects and exploitation of river-based resources have posed a serious challenge to the rafting business affecting thousands of workers.

He said that the Tourist Police should be provided with basic facilities like housing and offices.

 

Revoke VAT on air tickets

Lawmaker Sunita Baral said that the parliament will discuss the issues of tourism entrepreneurs and nudge the government to find solutions to their challenges.

Lawmaker Udaya Shumsher Rana stressed the need to revoke the decision to impose VAT on air ticketing as it has made travel to Nepal more expensive. He also said that structural reforms are required at the NAC.

Bhim Prasad Acharya, Chief of CPN-UML's Tourism and Civil Aviation Committee, said that while hospitality and tourism services in Nepal are comparatively economic, travel to Nepal from various parts of the world is very expensive and cumbersome.

"Therefore, we must have a strong national flag carrier. It can be created as a subsidiary company under the NAC," he said, while expressing his commitment to supporting the industry by pushing their valid demands.

Chairman of the International Relations and Tourism Committee at the House of Representatives, Raj Kishor Yadav, suggested coming up with pragmatic and plausible demands and plans for tourism sector development.

"As the chair of the concerned House Committee, I would like to assure you that if there are any policy-related issues, we will expedite them with utmost priority," he said.

Binod Prakash Singh, Secretary at the Ministry of Culture, Tourism and Civil Aviation, expressed his commitment to take up the agenda put forth by the private sector during the budget-making process.

"Some of the challenges are created due to the implementation of age-old policies and laws. We are in the process of updating them. The Ministry will organise an interaction with the entrepreneurs in this regard," he said.

Singh expressed frustration over the mismanagement of Nepal Airlines Corporation and its failure to procure aircraft and expand the market. 

 Published in The Rising Nepal daily on 20 March 2025.