Importing goods into Nepal is increasing rapidly, especially from India, China, and third countries. But the biggest confusion for most importers is always the same:

How to calculate customs duty in Nepal?
How much tax will Nepal Customs charge?
What is the final landed cost after duty and VAT?

If you are an importer, business owner, trader, or planning to start an import business, this guide will solve your biggest problem. In this article, we will explain customs duty calculation in Nepal step-by-step with real examples becasue as you know that i myself involve in branch of export import department of Prestige group of Industries in Nepal, so that you can estimate import cost before placing an order.

Why Customs Duty Calculation is Important in Nepal?

Many importers in Nepal fail because they only focus on product price but that is not actual cost. There are some others hidden charges are also available that we must consider while estimating cost of importing products. They forget that Nepal Customs adds multiple charges like:

• Customs Duty
• VAT
• Excise Duty (on some items)
• Customs Service Charge
• Road Maintenance Fee (in vehicles)
• Special Tax (depending on goods)
• Advance Income Tax (AIT / TDS)

That’s why a product that costs Rs. 1,00,000 in India or China can easily become Rs. 1,50,000 to Rs. 2,00,000 after tax.

So, understanding customs duty calculation is the first step to running a profitable import business in Nepal.

What is Customs Duty in Nepal?

Customs Duty is a tax charged by Nepal Government on imported goods when they enter Nepal. It is collected by Nepal Customs Department at border points like:

• Birgunj Customs (Raxaul Border)
• Bhairahawa Customs (Sunauli Border)
• Tatopani Customs (China Border)
• Tribhuvan International Airport Customs
• Dry Ports (ICD Birgunj, etc.)

Customs duty is calculated mainly based on:

• HS Code
• Customs value (CIF value)
• Applicable duty rate (as per customs tariff)

Key Terms You Must Know Before Calculating Customs Duty

Before jumping into calculation, you must understand these important terms.

1. HS Code (Harmonized System Code)

HS Code is the classification code used by Nepal Customs to identify goods. Every product has its own HS Code and duty rate.

Example:

• Mobile phone HS code has different tax rate
• Clothing has different duty
• Electronics has different duty

Without HS Code, customs duty cannot be calculated accurately.

2. CIF Value (Customs Value)

Nepal Customs calculates tax mostly on CIF value, which you can read my detailed article on the incoterms in previous post. But here CIF means:

✅ CIF = Cost + Insurance + Freight

So if you import goods from China or third countries, customs will calculate based on:

• Product invoice value (Cost)
• Freight charges (Shipping cost)
• Insurance charges (if applicable)

3. FOB Value

FOB means Free On Board, which includes product cost only up to export port.
FOB is important when freight and insurance are added later.

4. Exchange Rate Used by Nepal Customs

Nepal Customs does not always use market exchange rate. They use their own official exchange rate updated regularly. For more detailes you can checkout NRB website.

So even if your bank gives USD rate 132, customs may use 133 or 134.

What Taxes are Charged by Nepal Customs?

When importing goods into Nepal, you may need to pay:

✅ 1. Customs Duty

Based on HS Code tariff rate.

✅ 2. VAT (Value Added Tax)

Usually 13% in Nepal.

✅ 3. Excise Duty (Only on specific goods)

Applies on:

• Alcohol
• Cigarettes
• Vehicles
• Luxury items
• Soft drinks
• Plastic Items and many others

✅ 4. Customs Service Fee / Handling Charge

Generally around 1% (depends on policy)

Read Also: Nepal Import Procedure 2026 Step by Step

✅ 5. Advance Income Tax (AIT)

This is charged at customs, usually 1% to 1.5% depending on product type.

Step-by-Step: How to Calculate Customs Duty in Nepal

Now let’s understand the actual calculation process with proper real examples.

Step 1: Find HS Code and Duty Rate

First, identify your product HS code and check the applicable rates:

• Customs Duty %
• VAT %
• Excise Duty % (if applicable)
• Other taxes

For example:
If your product customs duty is 10%, VAT is 13%, then calculation becomes easy.

Step 2: Calculate CIF Value in NPR

Nepal customs duty is calculated in Nepali currency.
So convert your CIF value into NPR using customs exchange rate.

Read Also: Nepal Import Procedure 2026 Step by Step

Step 3: Calculate Customs Duty Amount

Customs Duty = CIF Value × Duty % (we can checkout custom duty on the official portal Nepal custom tariff website.

Step 4: Add Excise Duty (If Applicable)

Excise Duty = (CIF + Customs Duty) × Excise %

Step 5: Calculate VAT

VAT is calculated on total value including customs duty and excise.
VAT = (CIF + Customs Duty + Excise Duty) × 13%

Step 6: Add Service Charge and AIT

Customs Service Charge is calculated on CIF value.
AIT is calculated on total taxable value (varies).

Real Example: Customs Duty Calculation in Nepal (Simple Practical Example)

Now let’s take a real example so you understand clearly.

📌 Example Product:

You import LED TV from China

• Invoice value (Cost): USD 1,000
• Freight cost: USD 150
• Insurance: USD 20
• Total CIF Value: USD 1,170

Customs exchange rate:

USD 1 = NPR 133

So CIF Value in NPR:

CIF = 1,170 × 133 = NPR 155,610

Assume Tax Rate (Example)

(Real rate depends on HS code)

• Customs Duty: 10%
• VAT: 13%
• Excise Duty: 0% (not applicable)
• Customs Service Charge: 1%
• Advance Income Tax (AIT): 1.5%

Now calculate step by step.

Step A: Customs Duty

Customs Duty = CIF × 10%
= 155,610 × 10%
= NPR 15,561

Step B: Excise Duty

Excise duty is not applicable here, so:

Excise Duty = 0

Step C: VAT Calculation

VAT = (CIF + Customs Duty + Excise Duty) × 13%

VAT = (155,610 + 15,561 + 0) × 13%
VAT = 171,171 × 13%
VAT = NPR 22,252.23

Step D: Customs Service Charge

Service Charge = CIF × 1%
= 155,610 × 1%
= NPR 1,556.10

Step E: Advance Income Tax (AIT)

AIT = CIF × 1.5%
= 155,610 × 1.5%
= NPR 2,334.15

✅ Total Customs Payable Amount

Now add everything:

Tax Type	Amount (NPR)
CIF Value	155,610
Customs Duty (10%)	15,561
VAT (13%)	22,252
Service Charge (1%)	1,556
AIT (1.5%)	2,334
Total Tax Payable	41,703

Final Landed Cost in Nepal

Landed Cost = CIF Value + Total Tax
= 155,610 + 41,703
= NPR 197,313

So your LED TV that cost USD 1,170 (Rs. 155,610) becomes almost Rs. 197,313 after customs duty and VAT.

Important Note: VAT is Charged on Duty Included Value

Many new importers make one mistake:

❌ They calculate VAT only on CIF value
But in Nepal:

VAT is calculated on (CIF + Customs Duty + Excise)

This increases the total import cost significantly

Example 2: Customs Duty Calculation in Nepal for Import from India

Import from India is slightly different because goods are often invoiced in INR and freight is road transport.

Example:

You import Electrical Fans from India

• Invoice value: INR 2,00,000
• Freight: INR 10,000
• Total CIF (approx): INR 2,10,000

Assume exchange rate:
INR 1 = NPR 1.60

CIF Value in NPR:
2,10,000 × 1.60 = NPR 336,000

Assume duty rates:

• Customs Duty: 5%
• VAT: 13%
• Service Charge: 1%
• AIT: 1.5%

Customs Duty:

336,000 × 5% = NPR 16,800

VAT:

(336,000 + 16,800) × 13%
= 352,800 × 13%
= NPR 45,864

Service Charge:

336,000 × 1% = NPR 3,360

AIT:

336,000 × 1.5% = NPR 5,040

Total Tax Payable:

16,800 + 45,864 + 3,360 + 5,040
= NPR 71,064

Final Landed Cost:

336,000 + 71,064
= NPR 407,064

So goods costing Rs. 336,000 becomes Rs. 407,064 after customs taxes.

How Nepal Customs Determines Value If Invoice is Low?

Sometimes importers try to show low invoice value. But Nepal customs has its own valuation system.

Customs may check:

• Market price database
• Previous import records
• Reference value
• Catalog / website pricing
• Product brand and model

If customs finds your invoice is undervalued, they can apply:

✅ Customs valuation adjustment
and charge duty on higher value.

This is very common for:

• Mobile phones
• Laptops
• Vehicles parts
• Electronics

Common Mistakes While Calculating Customs Duty in Nepal

Here are major mistakes that importers make:

❌ 1. Using Wrong HS Code

Wrong HS code means wrong duty rate. Customs may penalize.

❌ 2. Not Adding Freight Cost

CIF includes freight, so always include transportation.

❌ 3. Not Including VAT Calculation Correctly

VAT is charged after adding duty.

❌ 4. Forgetting AIT (Advance Income Tax)

AIT can affect your final landed cost.

❌ 5. Assuming All Goods Have Same Duty

Different goods have different duty rate. Even same category items may vary.

How to Reduce Customs Duty Legally in Nepal?

If you want to reduce import cost, follow legal methods:

✅ Import under SAFTA / Preferential Agreement

If goods qualify under SAFTA, duty may be lower.

✅ Import raw materials instead of finished goods

Raw materials often have lower customs duty.

✅ Use correct HS code with proper product description

Proper classification avoids unnecessary extra duty.

✅ Buy from manufacturer and keep correct invoice

Genuine invoice helps in smooth customs clearance.

Customs Duty Calculation Formula (Easy Format)

Here is the simple formula:

✅ Total Customs Payable =

(Customs Duty) + (VAT) + (Excise Duty) + (AIT) + (Service Charge)

Where:

• Customs Duty = CIF × Duty %
• VAT = (CIF + Customs Duty + Excise) × 13%
• Excise = (CIF + Customs Duty) × Excise %
• AIT = CIF × AIT %
• Service Charge = CIF × 1%

How to Check Customs Duty Rate in Nepal?

You can check duty rates using:

• Nepal Customs Tariff Book
• HS Code database
• Customs agent support
• Nepal Customs website (if available)

For faster growth of your business, I suggest creating a custom HS code finder tool on your website. This will bring huge organic traffic.

Frequently Asked Questions (FAQs)

Final Conclusion

Calculating customs duty in Nepal is not difficult if you understand the process and follow correct steps. The main thing to remember is:

✅ Customs duty is calculated on CIF value
✅ VAT is charged on (CIF + Duty + Excise)
✅ AIT and service charge add extra cost
✅ HS code decides everything

If you are importing goods into Nepal, always calculate your expected customs duty before finalizing the purchase. This helps you set correct selling price and avoid business loss.