Industrial Enterprise Act, 2076

Objectives of IEA
1. Increase production of industrial goods or services
2. Increase in Employment
3. Import Replacement & Export Promotion by optimum utilization of resources.
4. Create dynamic & strong economy by making industrial sector easy, predictable, and effective.

Classification of Industries [Section 17]

Permanent Capital [Section 18]

G = Godown, Office, Factory Building
R = Residential Building for Labors, Employees
E = Electricity Equipments and Supply
T = Transportation
O = Office Equipments
F = Furniture and Fixture
C = Communication System and Equipments
L = Land and Physical Infrastructures- under & above ground and water
M = Machineries, Equipments, Tools and Spares

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Following expenses before commercial operation [i.e., Development or Construction Stage Costs]
a. Technical consultancy and Supervision Expenses
b. Pre-investment and Pre-operation expenses
c. Interest During Construction
d. Study of environmental impact and research prior to operation of industry

National Priority Industries [Section 19]

Industries mentioned in Annexure-1

Registration of Industries

Registration of Industries [Section 3]

1. Every industry shall be registered under this act before establishment or operation.
2. However, micro industries may apply for registration within 1 year of operation.
3. Industries shall be registered at Industry Registration Body (IRB)

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Department of Industries

Submit application to DOI with prescribed documents. **

Industries requiring permission in Annex 1 [Sec 8] Other Industries:

1. Established under foreign investment
2. Schedule 5 of Constitution
3. Industry operating in 2 or more province
Arms & Ammunitions, Others 4. Providing educational consulting services
Gunpowder pertaining to diplomatic matters

Permission of Council of Permission of

Ministers & Board is required. Board is required IRB shall check the submitted documents and if
it is inadequate, notify the applicant to submit
such inadequate documents within 90 days.

Applicant shall Apply to Board for permission through IRB.

IRB shall after examining the submitted documents, submit it Refusal for Registration [Section 4]
to Board along with its opinion within 7 days for permission. IRB can deny registering in the following
circumstances:
1. Additional documents asked is not
Board shall decide whether to give permission or not within
submitted, or
30 days
2. Procedures mentioned in Rules not
fulfilled.
Registration Certificate [Section 5]
IRB shall issue Industry registration certificate
within 5 days of receiving the documents if all the
required details or documents, on investigation, is
received.
The Registration certificate shall contain the
following:

Board has decided to Board has decided not 1. Date of registration

give permission to give permission 2. Duration during which the industry needs to
IRB shall Inform refusal of registration along commence its operation or transaction
with reasons for refusal within 5 days of such 3. Terms and Conditions to be fulfilled
decision. 4. Other Conditions, if any, specific for specific
IRB shall provide the IRB shall notify the
permission letter within 5 applicant within 5 days type of industries
days of such decision of such decision
Note:
Industries related to atomic energy, radioactive materials production, energy based on nuclear energy and
uranium shall be established and operated by GON only.
Apply for registration within period mentioned in the permission letter.
Permission is automatically revoked if not applied within prescribed time.
Applicant cannot transfer, sale or change ownership of such permission until commencement of transaction
unless on death of applicant.

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Province Level IRB
All the activities related to registration, regulation, and monitoring of other industries shall be done by
Province Level IRB.

Appeal [Section 6]
1. Any person dissatisfied with the decision of the IRB for non-registration, shall appeal within 30
days to the appeal hearing authority.

Decision of Board Ministry of Industries

IRB of Province Ministry of such province looking after industries

2. Appeal Hearing authority shall after necessary examinations, decide within 30 days.

Mitigation of Negative Impact on Environment [Section 7]

 Industries registered u/s 5

 Increment of capital. Capacity, Add/ Change in objectives,
change in address or transfer of industry.

IEE/ EIA required as per IEE/ EIA not required as per

prevailing laws. prevailing laws.

Establish, Operate, Produce While applying for registration of

and Transaction only after industries, applicant shall mention:
approval of IEE/ EIA. 1. Bases for concluding that no IEE/
EIA is required, and
2. Self-declaration to minimize the
negative impact on environment.

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Information of Commercial Operation to be provided [Section 9]

Commercial Operation

Started within time Not started within

mentioned in RC time mentioned in RC

Apply to IRB for time extension with

reasons and bases.
Inform the IRB within
30 days

Before 30 days of expiry Within 6 months of end

of time mentioned in RC of time mentioned in RC

Applicant shall pay delay

fee as prescribed.

Time Extended Time not Extended

3. For Extension more than 3 times, 1. Registration Certificate shall

Department apply to Board along with automatically be revoked.
its opinion for approval. 2. IRB shall notify the case of non-
4. Commence operation within the extension to the applicant within 7
extended time. working days of such decision.

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Relocation of Industries [Section 11]

A C
B

Application
Recommendation of local level
IEE/EIA
Permission of DOI (Interprovince relocation)

Capital, Capacity Increment and Change in Objectives [Section 12]

Increment of Capital or Capacity,

Change in Objectives

Permission is not required Permission is required

0. Micro Industries 1. Other industries shall apply to IRB for

1. Small & Cottage Industries which do
not require permission having the
fixed assets up to 1 crore
permission.
2. IRB shall on examination, if finds appropriate,
provide approval within 90 days.
3. If classification of industries is to be changed,
IRB shall update its register and indicate the
same in the Registration Certificate.

Returns to be submitted [Section 13]

Temporary Closure of Industries [Section 14]

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Cancellation of Industries [Section 15]

Industries

Registered in Other Registered under Company

Agencies Act.

Not Insolvent Insolvent under Prevailing

Laws

Follow the Insolvency Act.

Apply to IRB for cancellation

IRB shall order the concerned industry to

publish notice in National Daily Newspaper
to submit any debt claims within 35 days.

IRB shall cancel the registration within 7

days and update its register if debt claim is
paid within 7 days.

Inform about such cancellation to

concerned stakeholders.

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 Sick Industries

1. Meaning [Section 39]

GON may declare industry as sick industry under following circumstances.
a. Minimum of 5 years elapsed since commencement of production or operation.
b. Suffering loss for previous 3 consecutive years
c. Running in 30% or less of its capacity for previous 3 consecutive years
d. Not due to management weakness or intentional reason.

2 years 3 years

1. Consecutive loss
2. Running in <=30% capacity
3. Circumstances beyond control

2. Process of declaring Sick Industry

Industrialist Ministry of Industry

Application with business plan +
Equity Injection
Submit report

Forwards

Sick Industry
GON
Advisory Committee
Declare

Sick
Industry

3. Types of Sick Industries [Section 40]

1. Fully Sick
2. Sick
3. Partially Sick

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4. Benefits & Facilities to Sick Industries [Section 41]
GON may provide full or partial rebate on duty, fees and taxes to sick industries on:

1. Machineries
2. Equipments Imported for 1. Reconstruction
3. Tools 2. Extension
4. Devices 3. Diversification
5. Raw Materials

Rule 34
GON may provide or recommend the following additional benefits:
1. Conversion of normal loans to soft loan
2. Waive interest and penalty on outstanding loans.
3. Extend additional loans on concessional interest rate from BFIs for operation of Industry.
4. Extension of loan period in case of blacklisted Industries due to failure to repay the loan.

Corporate Social Responsibility [Section 54]

1. The following industries shall allocate 1% of net profit for CSR.

Micro
Cottage
IF annual turnover is > 15 crores.
Small
Medium
Large

2. The detailed progress report of CSR activity planned and performed during the year should be
submitted to IRB within 6 months of the end of financial year.

3. The amount so allocated should be used for the specified areas and shall be allowed as expenses
for the purpose of tax.

4. Violation of this Section (CSR not borne by industries)

a. 1 Year = 1.5% of Annual Net Profit
b. More than 1 year = Additional 0.5% of Annual Net Profit for every year

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 Facilities, Concessions and Exemptions to Industries
A. Income Tax [Section 24]

B. Customs Duty [Section 25]

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C. Micro Industries [Section 26]
1. No registration fees.
2. Tax holiday for 7 years (additional 3 years, if operated by women)

D. Women Entrepreneurs [Section 27]

E. Additional Facilities [Section 29]

S.N. Industries/ Conditions Facilities
1 Forest Based Industry Provide any part of forest on leasehold basis
prescribing the T/C.
2 Generate electricity for own use No royalty or fees
3 Sale of excess electricity generated Can sell at rates determined on mutual consent.
for own use
4 Electricity not supplied in industry Reduction in demand charge proportionately by
following prescribed procedures.
5 Micro, Cottage & Small Industries Provide seed capital
in remote areas
6 Micro, Cottage & Small Industries Exemption on custom duty
for Import of machineries for
capacity enhancement
7 National Priority Industries Additional facilities on recommendation and
decision of council of ministers by notification in
Nepal Gazette.
8 Industries operating under foreign Import permission from parent company for
investment promotion and manufacture of such product.
9 Industries in GoN may provide additional facilities and
 Very undeveloped, concession.
undeveloped, and
underdeveloped areas
 SEZ
 Industrial Area, gram & Product
specific zone

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  Manufacturing except tobacco
& alcohol, agro-forestry, and
Mineral industries

Nationalization [Section 34]

Guarantee of Facilities [Section 33]

Provisions related to Land [Section 30 & 31]

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Land Ceiling
Shall apply Forwards along
Any industry willing to Industry with its opinion Ministry of
to purchase land more Registration Body Industry, Commerce
than land ceiling. With prescribed (IRB) & Supplies
exemption on
land ceiling

documents
Apply for

Department of Land Site Visit, Check the physical status

Management and of the required land, ask additional
Archive details from offices.
Land related Act, 2021
Submit details

Terai = 10 Bigha
its opinion.
along with

Kathmandu = 25 Ropani
Hilly except Kathmandu = 70 Ropani

Ministry of Land  Ministry may give the permission upto certain limit if it deems
Management, appropriate.
Cooperatives and
Poverty Alleviation  Permission of Council of Ministers is required more than that limit.

Industrial and Investment Promotion Board [Section 20 & 21]

One Point Service Center [Section 37 & 38]

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Industrial and Investment Promotion Fund [Section 51]

Punishment [Section 43]

Offence Punishment
Non-Registration  Order of closing the industry, and
 Monetary Fine
Acted against the objectives  Monetary Fine
Information of commencement of  Monetary Fine
operation, transaction not provided u/s 9
Relocation u/s 11 or change in objectives,  Monetary Fine
capital, capacity u/s 12 without permission  Industries requiring permission u/s 8 except micro
industry - additional 100% penalty
Non-filing of returns and information u/s  Monetary Fine
13
Misuse of facilities and concessions  Withdraw facilities and concessions, or
 Recovery of utilized amount, or
 Both
Non-Compliance of acts, rules, directions,  Monetary fine
orders

Note:
Industry requiring permission - additional 50% fine.

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