As the deadline nears for Nepali internet service providers (ISPs) to clear dues to the broadband service providers in India, Nepal’s telecom regulator has taken a firm stance—clear taxes and access foreign exchange.

India’s bandwidth providers—Tata and Airtel—have given a deadline of December 31 to Nepali internet service providers to clear the dues of nine months totalling Rs3 billion or face supply disruption.

The Indian companies have warned they would stop providing bandwidth service to Nepal if the Nepali companies failed to clear the dues. This may impact the internet services of private operators, other than the state-owned Nepal Telecom.

On Sunday, the internet service providers and Nepal Telecommunications Authority, the telecom regulator, held a meeting to discuss the issue, said Santosh Paudel, director of Nepal Telecommunications Authority.

A first round of meetings has been completed, said Sudhir Parajuli, president of Internet Service Providers’ Association of Nepal.

“There is still confusion regarding the clearance of taxes on the non-telecommunications service.”

“We did not have to pay taxes on non-telecommunications services for the fiscal year 2017-18 largely due to the directive issued by the parliamentary Public Accounts Committee [of the past parliament]. On Sunday, we discussed why the authorities did not do the same for two other fiscal years 2018-19 and 2019-20 as per the committee directive,” Parajuli said.

He said the private-sector operators need to be exempted from taxes on the non-telecommunications service for two fiscal years.

The authority responded that it would study the matter before reaching any conclusion, he said.

Paudel said that the government is not yet convinced to exempt the taxes for the internet service providers for those two fiscal years.

“The decision is now on the hand of the government to go against the Office of Auditor General report and exempt the taxes,” said Paudel.

“Also, the law needs to be amended to waive the taxes,” he added.

Last week, internet service providers met with Minister of Communications and Information Technology Rekha Sharma and briefed her on the situation.

Sharma said they would discuss and resolve the issues, said Parajuli.

Parajuli said that the decision to waive the taxes on non-telecommunications components was published in the Nepal Gazette after the parliamentary committee’s ruling.

"Why is the government then forcing us to pay the taxes?”

According to internet service providers, if an internet service costs Rs1,000, almost 50 percent is allocated to support and maintenance services.

The sales of goods, support and maintenance charges and other charges unrelated to telecommunications are exempt from royalties and taxes, as per the directive issued by the parliamentary committee.

According to the association, Nepali private internet service providers have been buying international bandwidth from two Indian companies—Tata and Airtel.

The average bandwidth cost is $2 per Mbps per month. Two years ago, it was expensive—the average price was $4 per Mbps per month—which has now dropped.

According to the Management and Information System report of Nepal’s telecom regulator, the number of fixed broadband subscribers—wired and wireless—reached 10.7 million as of mid-August, compared to 8.64 million in the same period last year.

Fixed broadband (wired) covers 40.72 percent of the total population.

There are 20 ISPs in the country.

Parajuli said the payment for 1 terabyte purchased by Vianet, Subisu, WorldLink, and ClassicTech, among others, has been halted.