Online Amendment Class ORGANIZED BY: The Institute of

Chartered Accountants of NepalDate: 4th November 2020Time: 6:30

A.M. Onwards 

INDUSTRIAL ENTERPRISES ACT, 2076

Date of Authentication and Publication: 28 Magh 2076
 ACT NO. 19 OF THE YEAR 2076

Resource Person: CA. Mahesh Gyawali

gyawalimahesh2013@gmail.com
Preamble (Section 1): # Foster industrial enterprises to increase national productivity & make job opportunities.#
Make environment of industrial investment more congenial, competitive, straightforward and encouraging.# Make
optimum utilization of natural, physical or human resources available in the country.# Make progressive economy by
encouraging more exports & replacing imports.# Make available effective protection to industries.

Some Important Definitions (Section 2):

Body for Registration of
Industries
(Industrial Enterprises
Regulation, 2076)
One Point Service center
Transactions
Export Industry
Intellectual Property
Rights
Cottage Industries and Department of cottage and small
Small Industries industries
Medium Industries based on national investment, Department of Industries
Large Industries based on national investment and
Industries based on Foreign Investment
One point service center as referred in section 37.
Industries with national investment established in Special Economic Zones
special economic zones Authority established as per SEZ
Manufacturing or distribution of goods or services as per the objectives of the
Act, 2073
industry & other transactions related to such manufacture or services.
Any industry which exports more than 40% of its products , but does not
include energy-based industries.
Any patents, trademarks. Designs, service marks, business secrecy, etc. and it
also includes copyrights as defined in the prevailing laws.
Basic understanding of Registration of Industry (Section 3):# No person by himself or cause to incorporate
or operate any industries without registration under this act. # Every Industry shall be registered but certain industries require
permission before registration.# Micro Industry may apply for registration within 1 year from date of operation.# Any industry
incorporated as section/branch industry prior to commencement of this act, shall, within prescribed time, be registered as a
separate industry under this act.# Any industry desirous to make their manufacture or locate any part in a place different than
the place where the industry was located or any section industry not desiring to register as separate industry may be
incorporated & operated as unit industry & such unit industry shall be treated as a separate industry.# Industries producing
atomic energy, radio-active materials and uranium shall be established and operated by the Government of Nepal only.# Before
registering industries producing arms, ammunitions, gun-powder or explosive materials, approval from Council of Ministers,
Government of Nepal shall be taken.

Process to obtain Permission for Certain types of Industries (Section 8):

1. Make an application to the Industrial Investment and promotion Board through the body for registration of industries.
2. On examination of application, if the body for registration of industries is satisfied, it shall forward a report along with its
recommendations, if any, to the board within 7 days and the Board shall make a decision on whether to provide permission or not,
within 30 days & provide information accordingly to body for registration of industries.
3. The body for registration of industries shall issue permission letter or reasons of refusal, as decided & informed by the board, to
the applicant, within 5 days.
4. Application for registration of industries shall be made within the time specified in the permission letter and if application is not
made within specified time, the permission shall be ipso facto inactive.
Note:
The permission granted above shall not be transferred or sold before operation and commercial production or transactions. However, if
the applicant dies before operation and commercial production or transactions, remaining acts may be completed by the legal heir of
such applicant as per prevailing laws.
Arms, Ammunitions & Atomic Energy or Printing Securities, Radio Communication
Gunpowder Radioactive Materials Bank Notes and Equipment's
Minting Coins

Alcohol & Beer Extraction & Refining

of Gitti, Dhunga &
Baluwa

Industries
requiring
permissio
n
Cigarettes, Bidi, Cigar, Extraction of Mineral &
Chewing Tobacco, Petroleum
Khaini
Process to obtain Registration of Industry (Section
4):
Any person, firm or company desirous to
establish following industry:
Industries requiring permission
Industries to be incorporated with
foreign investment
Industries related with matters
specified in Schedule-5 of Constitution
of Nepal (Defense, military,
citizenship, passport, etc.)
Industries with work places in two or
more provinces
Service relating to education
consultancy in relation to diplomatic
mission
(Industrial Enterprises Regulation, 2076) Department
Make an application in the prescribed form along with the
following documents:
Copy of Citizenship or Passport for foreign nationals,
Registration certificate of firm or company,
Details of location with map of the place industry is to be set
up,Power of attorney of authorized representative if elected for
application,
Copy of approval of foreign investment, if any,
Partnership deed, if industry is to be established under
partnership,
Recommendation of VDC or municipality in which industry is
to be established,
Other documents, as prescribed

Other Industries Body for

registration in
Note: respective
province
On examination of application, if the submitted documents and information are inadequate, extra information and documents
may be demanded and it shall be the duty of the concerned applicant to submit them within 90 days. Government
Certification of the documents relating to registration by electronic signature shall also be valid and such documents can also be
presented online in electronic form.
Accept i.e. Registration (Section 5): Refuse i.e. Non – Registration (Section 4):

After examination, on being satisfied that all the prescribed After examination, on being satisfied that all the prescribed
documents and information have been received and all the documents and information have not been received or all the
procedures for registration as specified in this act or bye laws procedures for registration as specified in this act or bye laws
under this act have been complied with, under this act have not been complied with,
Register such industry and Reject the application for registration and
Issue industry registration certificate to the applicant within 5 Provide information, along with reasons, about such rejection to
days. the applicant within 5 days.
The registration certificate shall inter alia contain the following
particulars:
Date of registration
Duration within which the industry need to commence its
operation or transactions
Terms and conditions to be fulfilled
Other conditions, if any as specific for specific type of
industries

Appeal against refusal within 30 days to (Section Rejection done by

6):
Ministry Department
Ministry looking after industries in the concerned Body for registration of industries of a province
province
Mitigation of Negative Effect on environment (Section 7):

If any industry registered is required to conduct Environment Impact Assessment (EIA) test or Initial Environment Examination
(IEE), it shall initiate incorporation, operation, commercial production and transactions only after approval of such reports.
If as per prevailing laws, Environment Impact Assessment (EIA) test or Initial Environment Examination (IEE) is required to be
done before capital increment, efficiency increment, objectives addition, objectives change or relocation of such industries, it shall
be the duty of such concerned industries to conduct such tests.
Responsibility of mitigation of negative effect on environment shall be on the industry itself.
Body for registration of industries shall monitor about such EIA or IEE and may give direction or also recommend about
punishments, if any if not complied with, to the concerned department.
Industries not requiring to conduct EIA or IEE, shall provide the basis and reason for not requiring to conduct such tests and also
make a self-declaration that they shall take all necessary measures for protection of environment and mitigation of all the negative
effects.
Ramesh Kumar Singh Vs. Ramagya Shah Kalwar
कु नै पनि उद्योग वा व्यावसायिक प्रतिष्ठानले आफ्नो उद्योग कारखाना वा व्यावसायिक प्रतिष्ठान सञ्चालन गर्दा वातावरणमा प्रतिकू ल प्रभाव नहुने गरी उद्योग सञ्चालन गर्नुपर्ने । उद्योग सञ्चालनबाट वातावरणमा पर्ने प्रतिकू ल प्रभाव वा प्रदूषण
न्यून गर्ने उपायहरू वास्तविक रुपमा अवलम्बन गर्नुपर्ने र यसरी प्रदूषण नियन्त्रण वा वातावरणमा पर्ने प्रतिकू ल प्रभाव न्यूनीकरणको लागि उद्योगले अपनाएको पद्धति वा उपकरणमा लागेको खर्चमा कर छू ट पाउने समेतका व्यवस्था कानूनले
गरेको स्थितिमा स्थापित उद्योगको कारणले उद्योग अवस्थित क्षेत्रमा वातावरण प्रदूषण हुन नदिनु उद्योगको प्रमुख कर्तव्य तथा दायित्वमा पर्ने ।
Madhyamanchan Bone Industries Vs. Ministry of Industries
उद्योग दर्ता हुँदा पालना गर्ने गरी स्वीकार गरेका सर्तहरू उद्योग सञ्चालनका क्रममा पुरा नगरेकोमा सो सर्त पुरा गर्न पटकपटक उद्योगलाई पत्राचार गरेको देखियो । उद्योगका तर्फ बाट लिखितरूपमा वातावरण संरक्षण गर्ने भनी भएको सर्त
सम्झौता पुरा गर्ने भनी प्रतिबद्धता जाहेर गरेपनि सो प्रतिबद्धता कार्यान्वयन भएको भने देखिएन । स्वच्छ र स्वास्थ्य वातावरणमा जीवन जिउने हक प्रत्येक व्यक्तिको हुन्छ । निवेदकको उद्योग खोल्ने, व्यापार व्यवसाय गरी आर्थिक उन्नति
गर्न पाउने हक निरपेक्ष होइन । निजको प्रगतिको मूल्य त्यस क्षेत्रमा बस्ने सबै जनताले आफ्नो स्वास्थ्य बिगारी चुकाउनु पर्ने होइन । निवेदकको काम कारवाहीबाट त्यस क्षेत्रका नागरिकहरूको वातावरण प्रदुषित गरी स्वास्थ्य वातावरणको
हकबाट वञ्चित गर्न मिल्दैन । त्यसैले स्वास्थ्य वातावरण मानव जीवनको आधार हो । स्वच्छ वातावरण र मानव स्वास्थ्य भन्ने विषय अति संवेदनशील भएकोले विकास कार्यको नाममा मानव स्वास्थ्यमा प्रतिकू ल असर पर्ने गरी कसैले पनि
कु नै उद्योग सञ्चालन गर्न छु ट नपाउने ।
Information about commercial production, operation or transactions (Section 9):
By commencing commercial production, operation or transactions within the time period mentioned in Registration Certification,
information shall be provided to the body for registration of industries within 30 days of such commencement.
In case of non-commencement of operation, application with reasons should be filed for extension, before 30 days of commencement
deadline. (Can apply till 6 months of deadline with late fees).
On satisfaction, extension can be obtained for maximum 3 times. (For more than 3 times, approval from board is required.)
If time extension is not granted, then the registration permission of the concerned industry shall ipso facto be cancelled.

Inspection and supervision by the body for registration or board or ministry providing of necessary assistances
(Section 10): Whether the industry has complied with the directions, terms and conditions provided at the time of registering or not

Relocation of industries (Section 11):

Any industry (Industrial Enterprises Regulation, 2076) The body for
Make an application in the prescribed form with reasons and following documents: registration of
registered and Tax clearance certificate of previous year, industries
in operation in Audit report of previous year, (If relocation is from
one area, if Recommendation of VDC or municipality in which industry is to be relocated, one province to
desires itself to IEE Report, another, permission
If any facilities, concessions or rebates are availed, copy of recommendation from the of department is
be relocated to authorities granting such facilities, concessions or rebates, required)
another area Details of project.
for any reason
Note:
On receipt of
application, the
body for
registration of
industries may
permit the
Capital
increment,
efficiency
increment,
objectives
addition or
alteration of
objectives
(Section 12):
Any industry (Industrial Enterprises Regulation, 2076) The body
Make an application the prescribed format along with following documents:
desiring capital Copy of registration certificate, MoA & AoA if such industry is a company or copy of
for
increment, partnership deed if such industry is a partnership firm, registratio
efficiency Tax clearance certificate of previous year, n of
increment, Audit report of previous year, industries
Updated details of industry,
objectives Recommendations of any concerned departments, if required.
addition or
alteration of
objectives
Submission
Notes:
of returns (electronic form also allowed) within 6 months of end of FY (Section 13):
(Industrial Enterprises Regulation, 2076): Tax clearance certificate of previous year, Audit report of previous year, Approved and
On examination,
installed load (Capacity), Others.
if satisfied,
Note:
permission shall
If any industry is closed for more than one fiscal year or due to any reasons no transactions or operation is done, it shall submit zero
be granted within
return for such period. However, if the body for registration of industries had been informed about such closure and it had updated
90 days.
its If
register,
due to returns
capital for such period of closure is not required.
increment,
efficiency
Cancellation
of
registration
(Section 15):
If any industry, (Industrial Enterprises Regulation, 2076) The body for
due to some Make an application in the prescribed format along with the following documents: registration of
reasons is unable Assets Valuation report prepared by a licensed valuator. (However, in case of industry with industries
to carry on fixed assets up-to one crore, a report prepared by the industry itself shall be accepted.),
Documents proving of settlement of all the liabilities pending relating to workmen engaged
in the industry,
Documents proving settlement of all other liabilities,
Report of liquidator, if any,
Audit report of previous year,
Original registration certificate,
Self-declaration that no claims are pending in the court (if any such claims pending,
documents proving deposit of security up-to the amount of dispute).
Notes:
On receipt of
such
application, the
body for
registration of
Temporary closure of Industry (Section 14):
industries shall
If any industry
order the is to be closed due to some reasons or operation and transactions is halted for some time, then information about such
closure or halt must be provided to the body for registration of industries within 30 days of such closure or halt in the prescribed
concerned
format.
industry to
Management of records and registers relating to industries by the body for registration of industries (Section
publish a public
16)notice in
national daily
newspaper to
make claims
Permanent Capital or Fixed Assets (Section 18):
Land and physical infrastructures made on land, underground, in space, above water or under water,
Physical infrastructures made above land (i.e. sewerage, internal roads, infrastructures of drinking water, system of water distribution)
Office, factory building, go-down
Residential buildings made for employees,
Equipment related to electricity distribution,
Machinery, equipment and tools and consumables,
Means of transportation,
Office equipment of capital nature,
Furniture and fixture,
Equipment related to communication system.
Further, following pre-incorporation expenses and the expenses incurred during different stages of construction shall be treated as fixed
assets or permanent capital of the industry:
a) Capitalized technical consultancy and supervision expenses,
b) Pre-investment and pre-operation expenses,
c) The amount of interest during the construction period and
d) Expenses relating to study of environmental impact and research incurred prior to operation of the industry.
Amendment to permanent capital
(Industrial Enterprises Regulation, 2076):
The application for amendment of permanent capital shall be accompanied by following documents along with fees:
Copy of registration certificate, memorandum of association and articles of association if such industry is a company or copy of
partnership deed if such industry is a partnership firm,
Tax clearance certificate of previous year,
Audit report of previous year,
Updated details of industry,
Recommendations of any concerned departments, if required.
Classification
of industries
as per
permanent
capital or
fixed assets
(Section 17):
Micro Except the industries requiring permission following industries are classified as micro industries:
Industries Fixed assets investments (except land and building) ≤ Rs. 20 Lakhs
Employees ≤ 9 (Entrepreneur self-involved in management)
Yearly transaction < Rs. 1 crore
If power is used ≤ 20 Kilo watt.

Cottage Traditional industries

Industries Industries utilizing specific skill or local raw materials and resources, and labor intensive and related with
national tradition, art and culture,
If power is used ≤ 50 Kilo watt.
Examples i.e. Industries specified in Annexure 2: Handloom, Pedal loom, Semiautomatic loom, Warping,
Dyeing and printing, Tailoring (Other than Readymade Garments), Knitting, Hand knitted Woolen Mat and
Blanket (Radi, Pakhi), Woolen Carpet, Pashmina, Woolen Garments, Carpentry, Wooden Artistic product,
Cane and Bamboo Works, Natural Fiber Products, Hand Made paper and Goods made up thereof, Gold,
Philigiree Products including Silver, Brass, Copper Precious and Semi-Precious Stones, Ornaments,
Sculptures and Pottery, Honey, chyuri, Cardamom Processing, Clay or Ceramic Pottery, Leather Cutting and
Tanning, Rural Tanning and Leather Goods producing Works, Jute, Sabai Grass, Babio, Choya, Cotton
Thread Products, Artistic Products made up of Bones and Horns, Stone Carving, Ceramic Fine Arts, Pauwa,
Boutique, Incense Stick (Dhup), Dolls and Toys industries.
Classification of
industries as per
nature of
products or
services (Section
17):
Energy Based Industries Water resources, wind, solar, coal, natural oil, gas, bio-gas or any other sources, electricity
(Annexure 3)
transmission lines, electricity distribution systems, atomic energy, uranium energy,
electricity energy produced as co-products to sugar industries, study or research on
possibilities of energy.
Manufacturing Industries which produce goods by utilizing or processing raw materials, semi-processed
Industries materials, by products or waste products or any other goods.
Agro and Forestry Based Sericulture and silk production, horticulture and fruit processing, animal husbandry, dairy
Industries
(Annexure 4)
industry, poultry farming, fishery, tea gardening and processing, vegetable seed farming,
mushroom, vegetable farming or vegetable processing, tissue culture, green house, bee-
keeping, honey production, rubber farming, floriculture and production, and forestry
related business such as leasehold forests, agro-forestry, saw-mill, parqueting, plywoods,
etc.
Mineral Industries Mineral excavation or processing thereof.
Construction Industries Road, bridge, ropeway, railway, trolley bus, tunnel, flying bridge and industrial,
(Annexure 5)
commercial and residential complex construction and operation, stadiums, export
processing zones, special economic zones, cargo complex, waste water treatment plants,
telephone towers, optical fiber networks, space satellites, film city, film studies, private
Reclassification:
Any industry which had increased capital or increased efficiency or made additions to objectives or altered objectives shall be ipso
facto classified to the class in which they are to be classified.
Government of Nepal may, on recommendation of Board, by publishing a notice in Nepal gazette, make provisions to include any
type of industry in any classification or reclassification.
Any cooperatives association incorporated under prevailing laws, desirous to register any industry under its ownership, may register
industries as per this act.

National Priority Industries (Annexure 9) (Section 19):

Cottage Industries
Energy based Industries
Agro and Forestry-based industries.
Infrastructures/ Construction based Industries
Export Industries
Adventure tourism industries with infrastructures, rural tourism, gulf course, polo, pony trekking, hiking trails, rafting, religious
tourism, cultural tourism, entertainment parks construction and operation, wildlife reserves
Industries related to Mineral, petroleum and natural gas extraction and production
Industries producing clinkers and cement using domestic raw materials, Pulp and paper, sugar, fertilizers, powder milk, shoes,
slippers, dhago, animal husbandry, pisciculture, floriculture, rubber, powder milk, medicines, processing of wastages, manufacturing
Fuel Saving equipment, manufacturing pollution control devices, manufacturing devices and vehicles to be used by differently abled
people, manufacturing agricultural machineries, manufacturing industrial machineries, manufacturing electrical vehicles, producing
medicines for snakebites, manufacturing artificial lens for eyes.
Hospitals, nursing homes, veterinary hospitals and clinics, health checkup services, health laboratories, biological research labs and
medical colleges outside Kathmandu valley, metropolitan area and sub-metropolitan areas in Terai region,
IT related industries,
Industries located in industrial areas, special economic zones and industrial grams constructed and operated by private sectors,
Industries producing high price/ low volume products as specified by the Government of Nepal by publishing notice in official
gazette,
Industries producing products or services specified in Nepal Trade Integration Strategy (NTIS) like cardamom, ginger, tea, all fabrics,
textile, yarn and rope, leather, footwear, chyangra pashmina, knotted carpets, fruits and vegetables, all fabricated steel and metals,
lentils, silver jewelry, instant noodles, paper products, wool products, honey, readymade garments, coffee, semi-precious stones, etc.
Cinema film producing.
Industrial Investment Promotion Board (Section 20): To make decisions on policies regarding promotion and incorporation of
industries, encouragement of investments, protection and extension of industries and to foster the pace of industrialization

Functions, Duties and Power (Section 21): 1 Minister or State Minister

To render necessary cooperation in formulating and implementing policies, laws and Chairm for Industries. Commerce
regulations pertain to the industrialization of the country.
1. To give guidelines in attaining the objectives of liberal, open and competitive economic
an and supplies
policies pursued by the country so as to make the industrial sector competitive. 1 Member of National
To make recommendation to Government of Nepal regarding to the foreign investment
2.

and technology transfer.

Membe Planning commission
3. To maintain coordination between the policy level and the implementation level of the r looking after industries
industrial policy.
4. To cause to follow the ways and means for the prevention of the environmental pollution
1 Governor, Nepal Rastra
by putting more emphasis on the avoidance of effects on the environment and the public Membe Bank
health. r
5. To make recommendation to Government of Nepal for the inclusion of any industry in the
classification of industries or reclassification. 1 Secretary, Ministry looking
6. To make recommendation to Government of Nepal to introduce changes in the Areas by Membe after industries
making evaluation thereof from time to time. r
7. To give directives to the concerned body after making enquiries into the application
submitted by any industry complaining that the industry has not received the facilities and 1 Secretary, Ministry of
concessions to be made available by the committee. Membe Finance
To provide guidelines and make policies to create coordination between and provide
r
8.

recommendations to province governments and local levels.

9. To entertain or cause to entertain the grievances relating to industry. 1 Secretary, Ministry of
10. To operate One Window Committee or one point service centre.
Membe Labor, employment and
r social security
1 Secretary, Ministry of Land
Membe Management, Cooperatives
Secrecy (Section 22):
No person shall himself or cause to supply or disclose any confidential information or notice obtained in the course of performing
the duties of office to another person in unauthorized manner or use such information or notice for benefits of any person.
If chairperson, members, member-secretary or any person invited in meetings or employees performs the acts specified above he
shall be deemed to have acted against professional code of conduct and official responsibility

Industrial promotion board at province level (Section 23):

To make decisions on policies regarding promotion and incorporation of industries in province level, encouragement of investments,
protection and extension of industries of province level and to foster the pace of industrialization in province level, an industrial
promotion board may be constituted in province level also.
The functions, duties and power of this board shall be similar to the industrial promotion board formed under section 21 but it shall
be relating to province level only.

Annexure
10:
Classificatio
n of Areas
for facilities
and
concessions
Remote Darchula, Baitadi, Bajhang, Bajura, Achham, Doti, Mugu, Dolpa, Humla, Jumla, Kalikot,
Jajarkot, Rolpa, East Rukum, West Rukum, Mustang, Manang, Solukhumbu, Khotang,
Facilities and Concessions related to Income Tax (Section 24)
Type/ Nature of industry Facilities and concessions
Manufacturing & if Manufacturing and exporting 20 % rebate on applicable tax
rates Additional 5 % rebate on
applicable
Industries investing in and operating Road, Bridges, Tunnels, Rope-ways, 40 % rebate on applicable tax
Trams, Trolley Buses, Airports, Industrial infrastructures and complexes rates
Industries other than wine, cider or brandy industries based on fruits Rebate up to 10 years of commencement
of commercial manufacturing or
incorporated and operating in areas specified: operation:
Remote – 90%
Undeveloped – 80%
Underdeveloped – 70%

Industries relating to wine, cider or brandy production based on fruits Rebate up to 10 years of commencement
of commercial manufacturing or
incorporated and operating in areas specified: operation:
Remote – 40%
Undeveloped – 25%

Domestic
Royalties tea production
on export and processing
of intellectual industries,
property rightsdairy industries with 50 % rebate
25 % rebateon
onapplicable
applicabletax
business of mil related products, garment industries producing clothes rates
tax rates
Sale of intellectual property rights 50 % rebate on applicable tax
rates
Manufacturing or service industries to be incorporated with fixed assets 100 % Rebate up to 5 years of
or permanent capital above 1 arba and providing employment to more commencement of
than 500 employees throughout the year, And Industries now in operation transactions and 50 % Rebate
with increment of minimum 25% of its installed capacity and capital for next 3 years
Facilities and Concessions related to Income Tax (Contd…)
Type/ Nature of industry Facilities and concessions
Person or entity with permission for Production, transmission or 100 % Rebate up to 10 years
distribution of hydroelectricity, projects producing electricity from solar of commencement of
energy, wind energy or biotechnology up to 2080 B.S. transactions and 50 % Rebate
for next 5 years
Industries engaged in extraction and refining of minerals (except lime 100 % Rebate up to 7 years of
stones), petroleum, natural gas or fuels commencing its financial commencement of
transactions within 2080 B.S. transactions and 50 % Rebate
for next 3 years
Industries relating with tourism incorporated with more than 2 arba fixed 100 % Rebate up to 5 years of
assets or permanent capital commencement of
transactions and 50 % Rebate
for next 3 years
Industries notified by the Government of Nepal by publishing a notice in 50 % rebate on applicable tax
Nepal Gazette, relating to zoological, geological, biotech, IT parks, rates
software developers, data refining, cyber cafes, digital mappings, etc.
Manufacturing or IT related industries providing employment to prescribed number of Nepalese No. of employees ≥ 300: 15%
employees throughout a year:
rebate No. of employees ≥
1200: 25% rebate If the
employees contains minimum
50 % of female or dalits or
differently abled persons,
additional 15 % rebate is
Facilities and Concessions related to Income Tax (Contd…)
Type/ Nature of industry Facilities and concessions
Expenditures done by any industry relating to long term benefits of its Allowable
employees or welfare activities like life insurance, health and medical
facilities, social security fund, education and trainings, child care,
physical fitness, etc.
Any manufacturing industry with trainees (minimum 10 % of its total Allowable
employees) and making expenditure in training of such trainees, daily
allowances and expenditures made for increment and development of
efficiency of employees
Expenditure relating to techniques or methods or products that helps in Allowable
reducing energy consumption by increasing energy efficiency
Expenditures made for increasing production, efficiency of employees, Expenditure allowed in the
research and development and new techniques formulation same year: 50 % of Adjusted
Taxable Income and
Expenditure in excess of
above are to be capitalized in
the beginning of next F.Y. and
depreciation can be claimed
Expenditures relating to market or business promotion, penetration and Allowable up to prescribed
advertisement limit
Expenditures relating to security of physical assets of the industry and Allowable
insurance premium
Facilities and Concessions related to Income Tax (Contd…)
Type/ Nature of industry Facilities and concessions
More than one facilities in relation to same income Only one facility as opted by
the industry
Except tobacco or alcohol related industries or casinos, all industries No dividend tax on such
which have used the retained earnings in efficiency increment of the capitalization
industry or manufacturing or energy based or agriculture based industries
Facilities
which haveand Concessions
converted related to
such retained Custom
earnings Duties
into (Section 25)
capital
Type/ Nature of industry Facilities and concessions
Industries exporting their products or services without availing facilities Refund of amount of duty
of bonded warehouse or cash retention (pass book) drawback
Industries exporting their products or services without permission of Can import the raw materials
bonded ware house but through LC or prevailing banking systems or sale or other necessary raw
within Nepal in convertible foreign currency materials or packaging items
not produced in Nepal by
depositing guarantee
Import of industrial machineries or generator of 10 KW or more or other Lowest custom rates
industrial equipment
Import of machineries relating to quality check or other scientific Lowest custom rates
equipment or machineries or equipment relating to research and
development
Industries producing intermediate goods used in products that are Refund of custom duties on
exported the basis of quantity
Other Facilities and
Concessions to
micro industries
(Section 26)
Type/ Nature of Facilities and concessions
industry
Micro Industries No registration fees on registration of Micro Industries.
Budget 77-78
Additional Facilities 7-year Tax Holiday for any Micro Industries in operation before this act or any Micro Industries incorporated
and Concessions to under this act.
Addition 3 years tax holiday if such micro industry is being operated by women entrepreneurs
women
entrepreneurs
(Section 27)
Type/ Nature of Facilities and concessions
industry
Industry with women 35% concession on industry registration fees.
entrepreneurship 20% concession on registration fees for registration of industrial assets.
Special provisions for industries located wishes
If women entrepreneur in industrial
to establishareas
industry(Section
in an industrial area, she shall be availed space inside the
28) industrial area with priority as prescribed.
Type/ Nature of industry Industry registered with the sole ownership of women entrepreneur may be availed export credit as prescribed
Facilities and concessions
for the purposes of export of its industrial production on the basis of financial position of the business.
Industry located in Industrial Areas, Industrial Clusters, Industrial As specified by Government
Corridors, or Industrial Grams of Nepal
Further facilities for special
type of industries (Section
29)
Type/ Nature of industry Facilities and concessions
Forest based industry Forest-based industry may be made available any forest on a leasehold
basis.
Generates electricity for its No royalty shall be imposed if any industry generates electricity for its
own use use.
Sale of electricity generated If electricity generated for its use is in excess then it can be sold as per the
for own use rate under contract.
Industries established in EPI Government of Nepal may, by notification published in the Nepal Gazette,
and Industrial estates grant additional facilities to the Export Promotion Industry and prescribed
industries established in the Export Processing Zone and in the
government or non-government industrial estate.
National Priority Industries On the recommendation of and with the decision of the Council of
Facilities to production- Except
Ministers,forand
tobacco and liquor
by notification industries,
published in thegovernment
Nepal Gazette,of Nepal may
additional
oriented industries provide
facilities incentives,
may be granted exemptions, benefitsPriority
to any National or concessions
Industry to or the
any industry
production-oriented
established in Nepal by industries,
the way ofindustries
invention related
done in to in agriculture
Nepal itself.and
forest-based products and mineral industries.
Concessions during the Concessions can be provided to the industries for the period when there is
Exemptions
period of lacktoofmicro,
electricity Exemptions
no electricityonsupply
custom as duties to micro
per demand and cottage and small industries
charge.
cottage
supply and small while importing new technologies including machineries, tools and
industries equipment as required for capacity enhancement of such industries.
Grants for seed capital Grants can be provided to micro, cottage or small industries situated in remote areas for Seed capital:
Industries located in Special
aLp k"FhLarrangement
-l;8 Soflk6n_. to provide incentives, exemptions, benefits or
Product specific zones
Import permission for new concessions
For industries tooperating
industriesunder
operating in industrial
foreign estate
investment, areas,
import product can
permission
Land to be purchased by industry itself (Section 30)
Land should be purchased by industry itself. Provided that, if the entrepreneur cannot purchase by himself then he may apply, with reasons, to the
department and department can assist in such purchase.
(Industrial Enterprises Regulation, 2076):
Following industries shall obtain such assistance from department:
National Priority Industries,
Export Industries,
Medium and Large scale industries established in Under-developed areas,
Industries providing employment to minimum 500 employees,
Industries investing more than ten arba in Permanent Capital,
Industries based on minimum 50% local national raw materials in its finished goods and in case of imported raw materials, medium and large scale
industries with minimum 50% value addition.

Land to be made available on lease (Section 31)

National Priority Industries can apply to the body for registration of industries for lease rental facility for land under ownership of GoN.
(Industrial Enterprises Regulation, 2076):
The application for such land lease shall be accompanied by following documents:
Copy of registration certificate,
Details of industry project,
Details of area required and location of land,
Recommendations to be obtained from any other authority, if any,
Reasons for obtaining such lease,
Recommendation from concerned local federal level.
Applications received from such NPIs shall be forwarded to ministry and facility may be provided by GoN as per prevailing laws. Terms and conditions
of lease rental shall be as per the agreement between GoN and applicant. If any industry in operation on lease rental land is unable to operate then, the
land shall revert to GoN and agreement shall be ipso facto suspended.
Possession of land in excess of threshold limit (Section 32)
If any industries require land in excess of threshold limit, it shall make an application to the body for registration of industries to for permission
to own and possess such land in excess of the threshold limit prescribed.
On receipt of such application, the body for registration of industries shall, after inquiry and investigation prepare and forward a report along
with its recommendation to the ministry.
Government of Nepal may grant such permission to keep or possess such land in excess of the threshold limit prescribed on the basis of
necessity or scheme or project proposal presented by the industry.
Body for registration of industries may monitor the use of such excess land and if any misuse is found Government of Nepal may revert back
such land without any conditions.
Such land owned or possessed in excess of the threshold limit prescribed on permission of GoN shall not be sold or transferred or disposed off
otherwise or kept as collateral for bank loans.
A project can acquire land as stated in the approved EIA and/or DPR.  However, the maximum limit a person (including company) can hold
land is defined by The Lands Act 2021. For anything above the ceiling limit, the company needs to request the Ministry of Land Management,
Co-operatives and Poverty Alleviation for approval before acquiring land for the project.  The current ceiling limits are:
All Terai (Plain) Regions (including Inner Terai): 10 Bigha (68,820 m2),
Kathmandu Valley: 25 Ropani (12,718.50 m2) &
All Hilly Regions Except Kathmandu Valley: 70 Ropani (35,611.80 m2)

Guarantee of facilities (Section 33)

An industry which is operated by obtaining permission or by getting registered under the Industrial Enterprises Act, 2073 shall continue to enjoy
the time bound facilities and concessions under the Act and with regard to the facilities and concessions for which no time has been fixed; it
shall enjoy the facilities and concessions under this Act.
Kantipur television Network Ltd. Vs Ministry of communication
सरकारले कु नै उद्योग व्यवसाय सन्चालनको लागि कसैलाई सहमती प्रदान गरी आश्वासन दिएपछि त्यही विश्वासमा परी अर्को पक्ष अगाडि वढेकोमा सरकारले पछि कु नै कारण जनाई पहिला दिएको अनुमती फिर्ता लिन सक्दैन, त्यस्तो सहमती र अनुमती
 
पुरा गर्नुपर्ने ।
Industries not to be nationalized (Section 34)
No Industry registered under this act shall be nationalized.
No industry shall be directly or indirectly acquired or taken over, except for the shake of public interest. For acquisition or take over for the
shake of public interest, applicable prevailing laws shall be complied with.

Industrial safety (Section 35)

For the industries registered as per the prevailing laws, Government of Nepal shall provide the industrial safety as prescribed.

No misuse of facilities and concessions (Section 36)

The facilities and concessions granted to industries shall be utilized for the same purpose for which it was granted.
If any industry contravenes this act, or rules or regulations made hereunder such industries shall not be granted concessions and facilities under
this chapter.
One-Point Service Center (Section 37): For the purpose of making easy and on time availability of the services, facilities, exemptions,
rebates and concessions to be enjoyed by any industry under this Act or any other relevant acts or facilitating all activities to be performed by
different government authorities at one place and services of permission, registration, extension or cancellation of industries at one place
Government of Nepal constitute and operate a One-Point Service Center. The location, facilities that may be provided to industries by such one-
point service center, representatives of department in the committee shall be as prescribed.

Functions, Duties and Power (Section 38):

To perform functions relating to, as per prevailing laws, registration of company, firm or industries, permission, renewal, approval for commencement of
transactions, efficiency increment, winding up (Except insolvency) and other administrative functions,
To perform functions relating to approval of foreign investment as per prevailing laws,
To perform functions relating to approval of labor or work agreements as per prevailing laws,
To perform functions relating to visas as per prevailing laws,
To perform functions relating to EIA or IEE as per prevailing laws,
To make recommendations as may be required for making time bound provisions on making available infrastructural services such as electricity, water,
means of telecommunications, land, road and so on required for the industries,
To implement and make necessary decisions for making available the facilities and concessions to be enjoyed by any industry under this Act or any other
prevailing laws,
To perform functions relating to approval of foreign exchange as per prevailing laws,
To provide PAN as per prevailing laws,
To perform functions relating to department of export, commerce and consumer welfare, export relating services, EXIM code, bonded ware house
facilitations as per prevailing laws,
To perform such functions as may be delegated by the Board under its functions, duties and powers,
To coordinate to the concerned departments for mines and related permissions,
To accept the documents regarding registration of industries in electronic form and to develop system of electronic process among inter departments,
To facilitate then acquisition of land by industry, assist in obtaining land on lease and facilitate if land is required in excess of limit prescribed,
To recommended export permission, if required, as per prevailing laws,
To establish investment portal and disseminate information regarding investments,
To perform all kinds of activities to facilitate industries,
To cause to comply with directions provided by department or ministries,
Other functions, duties and powers of the Committee shall be as prescribed by publishing in Nepal Gazette.
Identification of Sick Industries (Section 39):
Conditions:
Minimum 5 years has elapsed since commencement of production or business
Except on intentional or management weakness i.e. due to circumstances beyond control
Running under 30% or less of its production capacity during previous 3 years (Continuous)
Continuous loss for 3 years above

Industrial Enterprises Regulation, 2076:

Government of Nepal on recommendation from Ministry of Finance, declare any of the following industry as sick industry:

Industries unable to repay loan and interest,

Industries with exceptionally high loan in proportion to capital,
In case of industries listed in Nepal Stock Exchange, industries with share’s market price lower than face value,
Industries producing lower than break-even point for continuous previous 3 years,
Industries unable to be operated due to natural calamities, force majure or other circumstances beyond control,
Industries unable to compete in international markets, due to changes in international industrial or financial provisions.
For revival, reconstruction and management of industries closed on being sick industry, on examination of the scheme or project
analysis submitted by such industry, Government of Nepal may grant prescribed facilities or concessions for certain period.
Also Industries declared as sick industry may be revived by any cooperative associations with approval from investors.

Facilities and concessions to Sick Industries (Section 41)

Government of Nepal may provide full or partial rebate on duty, fees and taxes of any kind levied on machineries, equipment, tools or
devices imported for extension, reconstruction and diversification of such sick industry as per section 39 & 40.
Classification of Sick Industries (Section 40):

  Industrial
Enterprises
Regulation,
2076
Classification Fully Sick Sick Partial Sick
Except for intentional or managerial weakness Y Y Y
Decrement in Equity 70% 50% 30%
Running
Revival ofunder ___ % or
sick industries less of42):
(Section its production 20% 25% 30%
capacity during previous 3 years (Continuous)
For the purpose of providing recommendations on identification, classification, revival, reconstruction or management of Sick
Closed
industries,for previous
Government of ___
Nepalyears (Continuous)
may form a board constituting of3experts of the related fields.
2 1
On providing
Industrial anyRegulation,
Enterprises facilities, concessions and
2076 5 3 2
rebate as provided under this act or regulation
Such board shall have five members as constituted by Special class gazette or equivalent officer of GoN as convener and First class
and expected
gazette to officer
or equivalent operate in profit
of GoN, expertswithin ___
in the field of industries, commerce, banking and financial sectors as members.
years
Functions, powers and duties of such board shall be as prescribed.
Industrial Enterprises Regulation, 2076: Identify sick industries, Analyze physical and financial state of sick industries, On-site
study of sick industries, Recommend GoN about steps for revival of sick industries, etc.
Fines and Punishments
(Section 43)
Punish
Offence ment
for the
type of
industr
ies
(Rs.)
Micro Cottag Mediu Large
e& m
Small
Non registration: Order to close down the
industry also
5,000. 25,000 50,000. 1,00,000.00
00 .00 00
Acted against objectives 2,000. 50,000 1,00,00 5,00,000.00
00 .00 0.00
Not commenced its 2,000. 10,000 25,000. 25,000.00
commercial production or 00 for .00 for 00 for for every six
transactions as per section 9 or every every every months
non-submission of information six six six
regarding such commencement month month months
Note: s s
While imposing punishments under this section, if the industry is the industry requiring permission as per section 8, additional 50% of the prescribed
Relocated without
punishment permission
as above shall be charged. 5,000. 25,000 1,00,00 1,00,000.00
as per section 11 or alteration 00 .00 to 0.00 to to
Recovery as government due (Section 44):
Any punishments imposed as per this act shall be recovered as if they were government dues.

Opportunity to submit clarification (Section 45):

Before imposing any punishments as per this act, a reasonable opportunity shall be granted to submit clarification and
defend.
Appeal (Section 46):
Any person not satisfied with the punishment orders as per this act, may go for appeal to the concerned high court within 35
days of receipt of such information as follows:

Unsatisfied with decision of Appeal to

Body for registration of industries at local level Concerned District Court
Body for
Special registration
economic ofexport
zones or industries at province
processing zones orlevel & promoting
export Concerned
zones orHigh Court
international
Department
economic zones (Section 47):
Government of Nepal shall by publishing in official gazette specify special economic zones or export processing zones or
export promoting zones or international economic zones, tourists or any other areas.

Nepal Entrepreneurs Forum (Section 48):

For the effective implementation of acts and policies relating to industries, for promotion and facilitation and increased
coordination between public and private sectors, for identification of problems while incorporating and operating industries
and recommending necessary suggestions and recommendations to Government of Nepal, for assisting in implementation
of such suggestions and recommendations, Government of Nepal shall form a Nepal Entrepreneurs Forum with the
representation form private sector also. Formation, members, functions, duties and powers of the Nepal Entrepreneurs
Forum shall be as prescribed.
Industrial Human Resource (Section 49):
The human resource required for any industry shall have to be recruited from among Nepali citizens.
If any industry cannot be operated without person living outside his/her own country expatriate (emigrant) human resource, foreign
nationals may be appointed in such industry with the prior approval of the Department of Labor for a maximum period of five
years.
For the purpose of obtaining approval, the concerned industry shall apply to Department of labor with particulars regarding the
concerned industry’s requirement, non-availability of such skills in Nepal, etc.
If a person so appointed happens to be a technician of special category but not available within Nepal, such person may, with the
approval of the Department of Labor, be appointed for up to an additional period of two years.
A foreign national who is working in any industry and who is from a country wherein convertible foreign currency is in circulation,
may repatriate (take home) his salaries, allowances, emoluments, etc., in convertible foreign currency in an amount not exceeding
seventy percent of such salaries, allowances and emoluments.
The workers or employees in industries shall not be engaged in strikes, lockdowns, etc. that may cause obstruction in operation and
production.
However the valid demand of workers or employees can be settled in peaceful manner and with consultation of both parties.
Any disputes related to demand of workers or employees shall be settled by tribunals formed as per relevant act and such decision
of tribunals shall be final.
Employees who do not perform their duties diligently may not be provided with the remuneration.

Contract or Sub-contracts (Section 50):

Any industry registered and in operation as per prevailing laws may enter into contract or sub contract to manufacture goods,
except their major project, or any goods or services required for the industry.
Any industry, by fulfilling prescribed criterions, manufactures or produces services on prescribed quantity, under contract or sub
contract, for export oriented industries, such industries may be provided with exemption and benefit.
Industrial Investment Promotion Fund (Section 51):
For the promotion of industries and investment in Nepal, Government of Nepal shall form Industrial and Investment Promotion
Fund.
The fund shall contain following amounts:
Amount received from Government of Nepal,
Amount received from National association, entities or persons,
Amounts remaining in Micro, Cottage and Small Industries Development Fund, Venture Capital Fund, Technology
Development Fund, Industrial investment preservation and promotion fund, Sick Industries Revival Fund, Women
entrepreneurship Development Fund before the commencement of this act,
Amounts received from Foreign Government, Foreign association, entities or persons under bilateral or multilateral
agreements. (However, before receiving such amounts permission form Finance Ministries shall be required.)
The above fund maintained may be expended for following activities:
Micro, Cottage and Small Industries Development
Technology Development
Industrial Promotion
Sick Industries Revival
Women entrepreneurship Development
Expenditure of amounts of above such fund shall be as per approved annual budget.

Province level Industrial Investment Promotion Fund (Section 52):

For the promotion of industries and investment in Province Level, Province Government shall form Province Level
Industrial and Investment Promotion Fund.
Other provisions relating to operation and management of such fund shall be as prescribed in the province level laws.
Prohibition on double facilities (Section 53):
Government of Nepal or province Government shall not provide double facilities, concessions or rebates as per this act or
other prevailing laws to any industry.
Any facilities, concessions or rebates provided by Government of Nepal shall be informed to the Province level ministry
looking after industries and also any facilities, concessions or rebates provided by Province Government shall be informed
to the Department.

Corporate Social Responsibility (Section 54):

Applicable to:
Cottage industry having annual turnover more than NPR 15,00,00,000.00 (15 Crorers),
Small industry having annual turnover more than NPR 15,00,00,000.00 (15 Crorers),
Medium industry
Large industry
Allocation of: At least 1% of the annual net profit
Utilization: On the basis of annual plans and programs in the prescribed sectors.
The progress report of the utilization of the fund collected for CSR shall be submitted to the relevant government
authorities within six months from expiry of the financial year.
Amount allocated for CSR, shall be allowed to be deducted as expenditure for income tax purpose.
Violation of this section: Monetary Fine: 1.5% of Annual Net profit for first year and additional 0.5% of Annual Net Profit
for each successive years of violation

Industrial corridor, Industrial gram or Industrial cluster (section 55): As prescribed

Prohibition on building residential house or other house in industrial areas (Section 56):
No residential houses or other types of houses as a creation of residential society can be built in the area notified by GoN as
Industrial Corridor, Industrial Gram or Industrial Cluster and vice versa. If any person sustains loss due to above provision, GoN
shall provide reasonable compensation for that.

Use of electronic medium (Section 57):

For the ease and simplicity of industrial registration and other all activities, the body for registration of industries may make
provisions of use of electronic medium as per prevailing laws.

Use of Automatic Route (Section 58):

For the ease, simplicity and effortlessness of activities relating to industries administration from industrial registration to
cancellation of registration, the Government of Nepal may implement automatic route by prescribing type of industry, nature of
industry or investment limits.

Delegation of power (Section 59):

Any industry or owner of any industry may delegate any person by notarized power of attorney for the functions to be
carried out by them.
A copy of such notarized power of attorney shall be submitted to the body for registration of industries and if deems
necessary the body for registration may sought for the original copy also
Special Provision for extension of time or re-registration (Section 60):
On commencement of this act, if any industry registered as per prevailing laws, due to expiry of time period for
commencement of commercial production, operation or transactions or any industry which was not able to commence
its commercial production, operation or transactions even within extended time provided as per prevailing laws, may,
only once, under this act, make an application for extension of time, within 3 months of commencement of this act, to
the body for registration of industries.
On inquiry and examination of application submitted above, if the board for registration is satisfied, it may grant
extension of time, by following the prescribed procedures after taking following delay fines:

Type of industry Delay Fine

Micro Rs. 5,000.00 for every year
Cottage Rs. 15,000.00 for every year
Small Rs. 15,000.00 for every year
Medium Rs. 50,000.00 for every year
Large Rs. 1,50,000.00 for every year

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