Excise Tax Surges 14.8%: Alcohol, Tobacco, and Imports Boost Nepal’s Fiscal Revenue

Nepal’s excise tax revenue jumped by 14.8% in the first month of FY 2025/26, reaching Rs. 13.9 billion, compared to Rs. 12.1 billion in the same month last year. Excise — largely levied on alcohol, tobacco, petroleum products, and imported goods — has emerged as one of the strongest-performing tax categories despite a broader slowdown in overall revenue collection.

Analysts note that the sharp rise reflects two key trends: higher domestic consumption of excise goods such as liquor and tobacco, and increased dependence on imported goods subject to excise duties. Additionally, improvements in tax enforcement and digital billing systems have helped reduce leakages in excise revenue.

Excise tax now contributes 16.3% of total revenue, up from 13.7% last year, strengthening its role as the third-largest tax source after VAT and income tax. However, experts caution that heavy reliance on excise revenue — particularly from alcohol and tobacco — raises concerns about long-term fiscal sustainability, as it links revenue health to consumption of harmful products.