Changes to electric vehicle tax rates and a last-minute rush to clear imports before the national budget have once again thrust Nepal’s EV sector into controversy, prompting an investigation into hundreds of vehicles brought into the country.

The Armed Police Force (APF) has seized 776 electric vehicles imported through the Korala and Rasuwagadhi border points following suspicions that information about planned tax changes was leaked before the government unveiled the budget for fiscal year 2026-27.

The vehicles were impounded at multiple locations, including Hemja in Kaski district, Kusma in Parbat, Jomsom and Korala in Mustang, and Rasuwa district.

Deputy Inspector General of Police Bishnu Prasad Bhatta, spokesperson for the APF, said the vehicles were seized after authorities received information suggesting that fraudulent documents had been used during the import process. Of the total, 774 vehicles were imported through Korala and two through Rasuwagadhi.

“We circulated instructions to APF units across the country based on information that vehicles had been imported using fraudulent documentation,” Bhatta said. “The vehicles have been impounded and will be handed over to the concerned customs authorities for further investigation.”

Most of the seized vehicles belong to the Chinese EV manufacturer BYD. Its authorised distributor in Nepal, Cimex Inc, said the imports were carried out to meet growing demand for electric vehicles and fulfil customer orders that had already been confirmed.

“All imports were conducted in line with BYD’s production schedules, shipping availability, regular business planning and logistical considerations,” the company said in a statement. “All import and customs clearance procedures were completed in accordance with Nepal’s prevailing laws and regulations.”

The company rejected allegations that it had coordinated with the state agencies to avoid higher taxes or obtain any improper advantage.

“Claims that the company sought to benefit from tax changes through coordination with the government agencies are baseless, false and damaging to our reputation,” the statement said.

Cimex said its import decisions were based on inventory management, shipping schedules and commercial requirements, and that it would fully cooperate with any investigation.

The company said it was prepared to provide all relevant documents, including import records, customs declarations, shipping documents, border entry records, payment details and customs clearance approvals.

According to the company, the vehicles were cleared by customs between May 6 and May 27. Finance Minister Swarnim Wagle presented the national budget on May 29.

Bidur Chudal, chief customs officer at Mustang Customs Office, said vehicles had started arriving around May 23 and that 649 units were cleared through customs on May 26 and 27, before the budget was announced.

“The importer brought in around 50 to 60 drivers at once by bus to collect the vehicles,” Chudal said. “They began moving the vehicles on May 28. Some reached Jomsom, a few to Hemja and others to Kusma. Some are still in the customs yard.”

Chudal said some vehicles that had not yet completed customs clearance were seized directly from the customs yard. He insisted that all vehicles cleared by his office had gone through the legal process.

“I cleared 649 vehicles in accordance with regulations,” he said. “As far as I know, vehicles that had not yet completed customs procedures were taken from the yard. I do not see any other issue.”

Before the seizure, the Department of Customs transferred six officials from the Rasuwa Customs Office on Wednesday, including its chief, Tulsi Bhattarai. A new team led by Rajendra Dhungana, an under-secretary at the Ministry of Finance, was deployed in their place.

The finance ministry has also sent an inspection and study team led by Department of Customs Director Bhupalraj Shakya. The team includes representatives from Nepal Police and the Armed Police Force.

The seized vehicles remain under security watch at the locations where they were detained.

On Wednesday, the prime minister’s office directed the finance ministry to increase monitoring of EV imports and conduct a detailed investigation.

Ananda Kafle, spokesperson for the home ministry, said the finance ministry was leading the inquiry and that security forces had intervened at its request.

Following the seizure, the finance ministry convened a meeting on Thursday involving customs officials and representatives of Nepal Police and the APF. The investigation committee was formed after the meeting.

Department of Customs Director General Shyam Prasad Bhandari said the committee had already been deployed and further decisions would be made after its report is submitted.

Large-scale imports ahead of budget announcements are not unusual in Nepal. Businesses frequently adjust import volumes based on expectations of tax increases or reductions.

Ahead of the 2025-26 budget, importers rushed to bring in electric vehicles amid speculation that taxes would rise. More than 1,050 EVs were cleared through customs and stored at the Chobhar Dry Port before the budget announcement. More than 1,000 additional EVs were reportedly waiting at the Tatopani border crossing for customs clearance.

When the government ultimately left EV tax rates unchanged, many of those vehicles remained parked for months.

Customs officials say similar import surges have occurred in previous years.

“If government officials informed businesses in advance that tax rates were about to increase and advised them to import vehicles quickly, that would constitute a serious offence,” a customs official said on condition of anonymity.

“However, stockpiling products such as alcohol, cigarettes, and vehicles ahead of anticipated tax hikes has become a common business practice. Importers bringing in more vehicles before a potential tax increase is not unusual. The government has every right to investigate, but it must establish that any wrongdoing actually occurred. Otherwise, legitimate businesses should not be harassed.”

Importers have strongly objected to the seizures.

“The finance ministry would be responsible, not traders, if information was leaked,” one importer said. “Businesses would have suffered losses had tax rates fallen instead. Importing vehicles under the prevailing rates until the night before the budget is completely legal.”

The controversy centres on significant changes to EV taxation announced in the new budget.

Under the previous fiscal year's tax regime, EVs with a power output of up to 50 kilowatts were subject to a 15 percent customs duty and five percent excise duty. Vehicles with capacities between 51 and 100 kilowatts faced 20 percent customs duty and 15 percent excise duty. Models between 101 and 200 kilowatts were taxed at 30 percent customs duty and 20 percent excise duty, while EVs between 201 and 300 kilowatts faced 60 percent customs duty and 35 percent excise duty.

A five percent road construction levy and 13 percent value-added tax applied across all categories.

The new budget abolishes excise duty on electric vehicles and replaces it with a Clean Infrastructure Investment Fee (CIIF). Under the Finance Bill 2026, a uniform customs duty of 20 percent now applies to all EVs.

Electric vehicles with a customs value of up to Rs2 million will face a 2.5 percent CIIF in addition to the 20 percent customs duty.

Vehicles valued between Rs2 million and Rs3 million will attract a 20 percent CIIF, while those priced between Rs3 million and Rs4 million will face a 35 percent levy.

The rate rises sharply for more expensive models. EVs valued between Rs4 million and Rs5 million will be subject to a 90 percent CIIF, while vehicles worth more than Rs5 million will face a 130 percent charge.

All vehicles will continue to be subject to customs duties, road construction levies and 13 percent VAT.

However, Finance Minister Wagle later acknowledged that a “small footnote” had been left out of the budget documents and subsequently revised the road construction levy for EVs priced below Rs2 million from five percent to 2.5 percent.