ISPs Agree to Settle Taxes on Rural Telecommunications Fees and Royalty Charges Following Supreme Court Directive

Nepal's internet service providers (ISPs) have agreed to clear taxes related to rural telecommunications development fees and royalty charges on maintenance, which they had previously refused to pay. This decision follows a Supreme Court verdict that mandates adherence to government-imposed guidelines.

The government has been urging ISPs to remit the Rs 3.64 billion collected under these headings since the fiscal year 2017/18. ISPs had resisted transferring these funds, arguing that they were not liable for taxes on maintenance fees collected from customers. However, the Supreme Court recently dismissed all eight writ petitions filed by ISPs, compelling them to comply with the payment requirements.

An official from WorldLink Communications Ltd stated that ISPs are awaiting the full text of the Supreme Court's decision to proceed with settling the dues. "We are in discussions with the Nepal Telecommunications Authority (NTA) to establish a modality for clearing these dues," the source added.

The government and ISPs have been in conflict over this tax issue for several years. The government insists that ISPs pay their outstanding taxes on non-telecommunication services, including web services, co-location, hosted services, disaster recovery, managed services, data centers, and cloud services. The Ministry of Communications and Information Technology (MoCIT) had previously formed a study team led by Joint Secretary Gaurav Giri to investigate the ISPs' tax evasion. The Office of the Auditor General has also highlighted the ISPs' non-compliance in its annual reports over the past eight years.

ISPs have argued against paying taxes on non-telecommunication components, citing a decision by the parliamentary Public Accounts Committee that exempted them from such taxes. Amid these ongoing disputes, the MoCIT has refused to recommend that ISPs receive foreign exchange facilities from Nepal Rastra Bank to settle their outstanding dues to Indian companies. This refusal led to significant disruptions in internet services three weeks ago, primarily because ISPs failed to pay their dues to Indian bandwidth providers.