Nepal’s textile industry is facing a severe downturn following the removal of a 70 percent VAT refund policy five years ago. The Nepal Textile Industries Association reported that the number of operating factories has fallen sharply from 250 to around 50, putting an estimated Rs 20 billion in investment at risk. Although domestic demand stands at Rs 600 billion, the association said illegal imports from India dominate the market, accounting for nearly Rs 500 billion. Local producers struggle to compete with India’s 5 percent GST compared to Nepal’s 13 percent VAT. The association has called for immediate policy reforms and stronger border controls to protect the industry.
