The government’s tax and non-tax revenue surged by 69 percent in the first half of the current fiscal year, as imports and consumption normalised in the aftermath of the trade embargo imposed by India.

The government raised Rs277.6 billion in tax and non-tax receipts in between mid-July and mid-January of 2016-17, as against Rs164.3 billion in the same period a year ago, show the latest statistics of the Ministry of Finance (MoF). 

Higher revenue was generated on the back of sharp hike in collection of customs and excise duties, and value added and income taxes, says the MoF report. With this tax and non-tax collection, the government has beaten its revenue collection target of Rs258.7 billion for the six-month period by 7.3 percent.

The government’s tax and non-tax receipts had dropped sharply in the first half of the last fiscal year because of trade blockade imposed by India which disrupted supplies of almost everything from essential goods to raw materials and petroleum products. 

In a country, where the government generates most of its income from taxes levied on imported goods, the supply disruption, which started in the fourth week of September 2015, dealt a huge blow to Nepal. 

But since the normalisation in the supply situation following the end of the trade embargo in February, consumption has been going up, raising imports and thereby government’s revenue. 

In the first half of this fiscal year, value added tax (VAT) made the biggest contribution to the government’s revenue. The government raised Rs74.7 billion in VAT in the six-month period, making a contribution of 26.9 percent to the total revenue. In the same period last fiscal year, the government’s VAT collection stood at Rs48.5 billion.

“VAT collection has jumped this year because of higher imports,” MoF officials said, adding, “Almost 50 percent of VAT is collected from customs points.”

Another major contributor to the government’s revenue in the first half of the current fiscal year was income tax. The government raised Rs61.9 billion in income tax in the six-month period, marking a year-on-year increment of 47 percent. With this, contribution of income tax in the government’s total revenue stood at 22.3 percent. 

“The main reason for hike in income tax is growth in business activities since the normalisation in supply situation,” said MoF officials.

Next in the league table of biggest contributors to state revenue was customs duty. Collection of customs duty surged by 101.8 percent to Rs55.5 billion in the first six months of the current fiscal year, largely because of jump in imports, including automobile. With this, customs duty’s contribution to total government revenue hovered around 20 percent.

Among others, collection of excise duty jumped 98.6 percent to Rs43.9 billion, non-tax revenue grew by 36.9 percent to Rs21.9 billion and different registration fee surged by 151 percent to Rs9.8 billion, show the MoF statistics.