The government officially scrapped the three percent equity tax levied through the fiscal budget on education and health services.

Government spokesperson Sasmit Pokharel said that the Cabinet meeting held on Wednesday decided to withdraw the tax, which had taken effect on July 17. Furthermore, officials committed to refunding all duties collected from citizens over the past week directly into their bank accounts within 50 days.

The Ministry of Finance will execute the refund process. "The Cabinet's decision is sent to the finance ministry for implementation," said Dipa Dahal, Press and Research Expert to Prime Minister Balendra Shah. "The finance ministry will initiate all necessary procedures to execute the order."

The three percent tax, introduced through the current fiscal year's Financial Act, sparked widespread public criticism. Responding to public outrage, Prime Minister Shah announced the tax withdrawal on social media on Tuesday, prompting Wednesday's formal Cabinet decision.

Under the new directive, the Prime Minister's Office will instruct the finance ministry to issue orders to the departments such as the Inland Revenue Department to process refunds. "If individuals fail to claim their money or if technical issues arise, the funds will be deposited into the government's consolidated fund," noted the secretariat.

The Prime Minister's Office clarified that as an executive order, the decision takes immediate effect without requiring Gazette publication.

Finance Minister Swarnim Wagle confirmed that the education and health tax has been suspended for the time being following consultations with the prime minister.

He said the ministry has already prepared a proposal for its withdrawal. The Cabinet is expected to decide on the matter, after which the government’s decision will gain legal validity.

Until then, the three percent tax remains legally enforceable. This has created uncertainty among taxpayers, government officials and tax authorities over the treatment of amounts collected since July 17.

“The proposal for the withdrawal of the tax has been prepared and it will be implemented after Cabinet approval,” a finance ministry official said. “The issue of refunds will also depend on the Cabinet’s decision. If the Cabinet decides to return the collected amount, taxpayers will receive refunds. Otherwise, it will remain with the government.”

Officials earlier said no decision on refunds could be made before the Cabinet formally resolves the matter.

Shah announced the rollback of the tax on Tuesday following widespread criticism from the public and stakeholders. He said the decision was taken after consultations with Finance Minister Wagle.

The prime minister said the tax was originally introduced to mobilise resources to improve education and healthcare services in remote and disadvantaged areas, support marginalised communities, expand health insurance coverage and widen the tax base.

He said the government had taken public concerns seriously and remained committed to correcting decisions that failed to meet citizens’ expectations.

Shah also reiterated that the government would continue with plans requiring private hospitals to reserve 10 percent of beds and private colleges and universities to allocate 10 percent of seats for underprivileged citizens through a transparent process.