Nepal Government Revenue 2025/26: Eight-Month Report
Nepal's total government revenue and receipts for the first 8 months of FY 2025/26 reached Rs. 751,856.7 million, up just 3.04% from Rs. 729,658.8 million in the same period of 2024/25. This modest growth raises questions about fiscal sustainability.
Revenue Breakdown (8M 2025/26)
| Source | Amount (Rs. M) | Growth YoY | Share |
|---|---|---|---|
| Value Added Tax (VAT) | 225,534.5 | +7.35% | 30.0% |
| Income Tax | 170,804.1 | -1.42% | 22.7% |
| Customs Duty | 155,901.4 | +8.13% | 20.7% |
| Excise Duty | 120,367.3 | +10.55% | 16.0% |
| Education Service Tax | 3,978.5 | +66.63% | 0.5% |
| Non-Tax Revenue | 70,694.8 | -13.31% | 9.4% |
| Other Receipts | 4,576.1 | -50.86% | 0.6% |
| Total | 751,856.7 | +3.04% | 100% |
Key Observations
1. VAT is the top earner: Rs. 225,534.5M (30% of total) growing at 7.35%, driven by increasing consumption and import growth.
2. Income tax declined: The -1.42% drop in income tax collection is concerning, suggesting either economic slowdown in formal sectors or compliance challenges.
3. Excise duty performing well: +10.55% growth reflects higher consumption of excisable goods (alcohol, tobacco, vehicles).
4. Non-tax revenue fell sharply: -13.31% decline from Rs. 81,547.7M to Rs. 70,694.8M indicates lower returns from government enterprises and services.
Revenue vs GDP Growth
With GDP growing at 3.99% and revenue growing at only 3.04%, the revenue-to-GDP ratio is effectively declining. This means the government is collecting a shrinking share of economic output — a structural concern for fiscal policy.
Conclusion
Nepal's revenue collection is growing but slowly. The 3.04% growth lags behind GDP growth and inflation, suggesting real revenue is declining. Income tax contraction and falling non-tax revenue are particular concerns. The government will need to accelerate collection in the remaining 4 months to meet annual targets.