Process of Industry Registration in Nepal

16 August 2023

1. Introduction:

The Industrial Enterprises Act, 2076 (2020), provides guidelines for industry registration in Nepal. This Act was promulgated to make easy, predictable, and effective management of the industrial sector in Nepal. In Nepal, industry registration is possible with both provincial and federal government agencies.

2. Classification of Industry:

As per the Industrial Enterprises Act, registration of the industries are categorized on the basis of capital, asset, capacity, and objective. The categorized industries are further sub divided on the basis of nature of goods and service produced.

As per the Industrial Enterprises Act, registration of the industries are categorized on the basis of capital, asset, capacity, and objective. The categorized industries are further sub divided on the basis of nature of goods and service produced.

2.1 On the basis of capital and asset:

a. Micro Industry

Characteristics

  • Fixed capital not exceeding two million rupees, excluding house and land;
  • It includes maximum of nine workers including the entrepreneur;
  • It has annual transaction of less than ten million rupees;
  • It needs to have the capacity of electric energy, fuel or other oil engine to be consumed by the engine, equipment or machine, if any, used being twenty KW or less;
  • Without the prior approval of the government of Nepal.

b. Cottage Industry

Characteristics

  • It is labour oriented and based on specific skills or local raw materials and local technology, arts and culture;
  • It has the capacity of electric energy to be consumed by the engine, equipment or machine and used being upto fifty KW;
  • Industries based in Schedule 2 are registered as cottage industries.

Schedule 2

  1. Handloom, pedal-loom, semi-automatic loom, wrapping, dyeing and printing, tailoring (other than readymade garments) and knitting with traditional technology;
  2. Hand knitted woollen and silk mats and blankets (Radi, Pakhi), carpets, pashmina, garments, hand-made paper and goods made thereof;
  3. Goods based on traditional skill;
  4. Traditional sculpturing;
  5. Hand-made utensils made from metals such as copper, Pittal, Dhalout, brass and German   silver, and handicrafts;
  6. Hand-made utensils and traditional tools of domestic use made from iron such as knifes, Chulesi, Khukuri, sickle, Kuto, Kodalo;
  7. Hand-made gold or silver ornaments, goods, utensils (precious, semiprecious, and inclusive of those with ordinary stones);
  8. Industries cutting precious, semi-precious and ordinary stones available domestically cutting, rural tanning/hand-made leather goods;
  9. Industries based on natural fibres such as jute, sabia grass, Choya, Babiyo, cotton thread, allo;
  10. Stone arts (stone carved goods);
  11. Paubha, thanka art and other traditional chitrakala;
  12. Masks and putali and dolls reflecting traditional culture.

c. Small Industry

Characteristics

  • It is an industry with fixed capital not exceeding one hundred fifty million rupees.

d. Medium Industry

Characteristics

  • It is an industry with the fixed capital exceeding one hundred fifty million rupees but not exceeding five hundred million rupees,

e. Large Industry

Characteristics

  • It is an industry with the fixed capital exceeding five hundred million rupees.

2.2 On the basis of the nature of goods and service produced the above mentioned industries are further classified as:

a. Energy-based industry:

Characteristics

  • These kinds of industries are engaged in energy and power related activities.

Schedule-3

  1. Industries generating energy from water resources, wind, solar power, coal, natural oil and fuel or gas, biomass or other sources, industries manufacturing machines/equipment to be used for the generation of such energy;
  2. Electricity transmission lines;
  3. Electricity distribution system;
  4. Energy based on bio-gas;
  5. Electric energy to be produced as a co-production of the sugar industry;
  6. Energy potentiality study.

b. Manufacturing industry:

Characteristics

  • Industries manufacturing goods by using or processing raw materials, subsidiary raw materials or semi-processed raw materials.

c. Agriculture and forest product-based industry:

Characteristics

  • Industries mentioned in Schedule-4 manufacturing any goods from agriculture or forest product based raw materials or related to agriculture or forest products.

Schedule-4

Industries Based on Agriculture and Forest Products

  1. Fruits farming or fruits processing;
  2. Production, processing and storage of food products;
  3. Animal husbandry, poultry (including ostrich), animal breeding, challa kadne business, and production and processing of meat;
  4. Industries producing milk and processing of dairy products;
  5. Fishery, production, processing and packaging of fry;
  6. Industries producing animal feed from agro-products as the primary raw materials;

d. Mining industry:

Characteristics

  • Industries producing any metal or mineral substance other than metal by excavating or processing minerals.

e.  Infrastructure industry:

Characteristics

  • Industries mentioned in Schedule-5 building and operating physical infrastructures.

Schedule-5

 Infrastructure Industries

  1. Road, bridge, tunnel;
  2. Ropeway, railway, tram, trolley bus, monorail and sliding car;
  3. Runway/airport;
  4. Industrial structure and infrastructure complex;
  5. Assembly conference centre;
  6. Water supply and distribution;
  7. Irrigation infrastructure;
  8. Sports complex, stadium;
  9. Motor vehicle parking, parking house;
  10. Export processing zone;
  11. Special economic zone;
  12. Cargo complex;
  13. Polluted water purification industries (waste water treatment plant);
  14. Telephone tower, optical fibre network, satellite, satellite broadcasting centre;
  15. Housing and residential building;
  16. Building film city, building film studio;
  17. Construction, management and operation infrastructure for energy house and energy transmission line.

f. Tourism industry:

Characteristics

  • Industries mentioned in Schedule-6 related to tourism services.

Schedule-6

Tourism Industries

  1. Tourist housing, motel, hotel, resort, bar and restaurant;
  2. Travel agency, tour operator, healing centre, casino, massage, spa;
  3. Adventurous tourism, trekking, skiing, paragliding, water rafting, hot air ballooning, cannoning, parasailing, horse riding, elephant riding, bungee jumping, expedition, zip flyer, ultra light, sky walking, sky diving, and similar other adventurous games;
  4. Cable car construction and operation industries;
  5. Golf course, polo, pony trekking, trekking, cycling;
  6. Rural tourism, home stay and ecological tourism, agricultural tourism;
  7. Cultural, religious, assembly, conference and sports tourism;
  8. Fun park, Water Park;
  9. Wildlife reserve;
  10. Museum.

g). Information technology, communication technology and information dissemination technology-based industry:

Industries mentioned in Schedule-7 providing services of information, communication or information dissemination technology by using technology for the collection, processing and dissemination of information.

Schedule-7

Industries Based on Information Technology, Communication Technology and Information Dissemination Technology Part

(A) Informational Technology Industries:

  1. Technology park;
  2. IT park;
  3. Biotech park;
  4. Software development;
  5. Computer and related services;
  6. Data processing;
  7.  Cyber café;
  8. Digital mapping;
  9. Business process outsourcing (B.P.O.), knowledge process outsourcing (K.P.O.);
  10. Data centre, data mining, cloud computing;
  11. Digital signature certifying agency;
  12. Web portal, web designing service, web hosting, online classified advertising service.

(B)  Informational Technology Based Industries:

  1.  Internet service provider (ISP)
  2.  Telephone, mobile phone, mobile satellite phone operator service
  3.  Teleport service
  4.  Establishment and operation of satellite, establishment of satellite broadcasting   center, VSAT service
  5. Broadband infrastructure, telecom tower, optical network, satellite network
  6. Social networking, online message, video call, conference

(C) Dissemination Technology-Based Industries:

  1.  FM radio, digital radio service
  2. Digital land surface television, satellite television, cable television
  3. IP television, online service
  4. Digital cable television, network, direct to home (DTH) satellite service, MMDS network,  digital  television (DTTV) network
  5. Recording studio, broadcasting studio;
  6. Print media industries, audio-visual material production industries, advertisement production industries;
  7. Production of motion pictures or documentaries.

h. Service industry:

  • Industries mentioned in Schedule-8 producing or providing services.

Schedule-8

Service Industries

  1. Mechanical Workshop
  2. Printing and printing related services
  3. Professional research and development, management, engineering and design, legal, accounting, audit, teaching training, educational and technical consultancy services
  4. Jining and welling business
  5. Exhibition services
  6. Cultural and recreational business
  7. Construction business
  8. Public transport business
  9. Photography

3. Industry Registration Eligibility:

  • Any person, firm, or company who has the intention to establish an industry in Nepal can make an application to the Department of Industry for registration with the required form and prescribed documents;
  • The federal level registration body is assigned to register, renew and regulate industries related to section 1 of the act, foreign investment, any matter of federal level, atomic energy and uranium-based energy, academic consultancy services, diplomatic affairs, and industries which are operating more than two or more provinces;
  • Other industries concerning the provincial government are assigned to the provincial level registration body.

4. Checklist of Documents:

The following are the documents required for industry registration:

  • Application form prepared in accordance to Schedule 1.
  • Project details in accordance to Schedule 2.
  • Copy of Citizenship in case of nationals and Passport in case of foreigners.
  • Attested copy of company registration certificate, approved Memorandum of Association and Articles of Association (for a company).
  • Map details of the Industry Location.
  • Original copy of Power of Attorney and Identification Certificate.
  • Original copy of FDI approval letter for FDI based industries.
  • Partnership document in the case of partnership based company.
  • Letter of recommendation from the local authorities for registration of industry.
  • Approved environmental related report (IEE or EIA, as required).
  • Required to apply through online system.

5. Industry Registration Process:

The required documents for franchise of foreign brand in Nepal are:

  • In case of insufficient documents, the Department of Industry can immediately inform the applicant to submit the required details and documents within ninety days of receiving such application.
  • In case the applicant fails to submit the required details or documents the registration body can set out written reasons for rejecting the application within five days after such decision. If the applicant is dissatisfied with the decision of the department one can file a complaint to the ministry in both the federal and provincial level within 30 days.
  • The details in the industry registration certificate include the date of issue of the certificate, the period for the commencement of commercial production or transaction, the terms to be complied with by the industry, and such other terms as specified by the industry registration body by making a decision. However, in the case of a micro industry application may be made to the industry registration body for the registration of the industry within one year after the date of operation of that industry.
  • Industry after the commencement of its commercial production or transaction needs to submit operation details to the industry registration body within six months after the end of each fiscal year.

6. Special Provision:

For the industries enlisted in Schedule 1 of the Act one requires approval from the Industrial and Investment Promotion Board before registration. The applicant has to make an application to the Board through the industry registration body in such a form and accompanied by prescribed details.

Industries Requiring Permission;

  1. Industries producing arms, ammunition, gunpowder or explosives;
  2. Security printing, bank notes and coin industries; 
  3. Industries producing cigarette, bidi, cigar, chewing tobacco and other goods utilizing
  4. tobacco as the basic raw materials, and electronic cigarettes; 
  5. Microbrewery, beer, alcohol, or alcoholic substances producing industries;
  6. Stone, ballast, sand excavation, processing industries;
  7. Industries producing radio communication equipment;
  8. Industries like excavation of precious minerals and petroleum products;
  9. Liquefied petroleum gas (L.P.G) refiling industries;
  10. All kinds of industries producing drone products or providing services through drone;
  11. 10. Other industries requiring permission under the prevalent laws. 
  • The registered industry is required to provide the information about its operation, commercial production, or transaction to the industry registration within thirty days of its commencement.
  • If the industry does not start its operation, commercial production, or transaction within that time frame, it must inform at least 30 days before the period mentioned in the industry registration certificate expires or within six months of the date that period expires, upon payment of the delay fee.
  • Establishment of an inspection body to monitor the operation of the industries.
  • Penalty provisions for non-compliance during the registration of the industries.

7. Post Registration Compliance:

  • The registered industry is required to provide the information about its operation, commercial production, or transaction to the industry registration within thirty days of its commencement.
  • If the industry does not start its operation, commercial production, or transaction within that time frame, it must inform at least 30 days before the period mentioned in the industry registration certificate expires or within six months of the date that period expires, upon payment of the delay fee.
  • Establishment of an inspection body to monitor the operation of the industries.
  • Penalty provisions for non-compliance during the registration of the industries.

Disclaimer: This article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation or inducement of any sort from the firm or its members. The firm shall not be liable for consequences arising out of actions undertaken by any person relying on the information provided herein. 

The copyright of the contents of this article remains with Imperial Law Associates.

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