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Manufacturing Industry Registration in Nepal

Introduction

The manufacturing industry in Nepal is a significant contributor to national economic growth, industrial employment, and exports. Any individual or entity that wishes to start a manufacturing business must register under Nepalese law to obtain legal recognition and operational permission. Manufacturing businesses in Nepal are governed by the Industrial Enterprises Act, 2076 (2019), Company Act, 2063 (2006), and the Industrial Enterprises Regulation, 2078 (2021).

Registration allows the manufacturing unit to acquire government incentives, import machinery, and access foreign investment opportunities. The registration process involves multiple agencies, including the Office of the Company Registrar (OCR), the Department of Industry (DoI), and the Inland Revenue Department (IRD).

This article outlines in detail the legal process, required documents, registration steps, and licensing requirements for registering a manufacturing industry in Nepal. Medha Law and Partners Is a leading law firm in Nepal.

Legal Framework for Manufacturing Industry Registration in Nepal

Manufacturing industries are regulated primarily by:

  • Industrial Enterprises Act, 2076 (2019) — Governs registration, operation, incentives, and classification of industries.

  • Company Act, 2063 (2006) — Establishes procedures for incorporation of private and public companies.

  • Industrial Enterprises Regulation, 2078 (2021) — Provides detailed procedures for classification, licensing, and renewal.

  • Environment Protection Act, 2019 — Requires Environmental Impact Assessment (EIA) or Initial Environmental Examination (IEE) for certain industries.

  • Foreign Investment and Technology Transfer Act (FITTA), 2019 — Regulates foreign investment and technology transfer in manufacturing industries.

Every manufacturing unit must first register as a company and then obtain an industry registration certificate from the Department of Industry or Department of Cottage and Small Industries, depending on scale.

Types of Manufacturing Industries in Nepal

Under the Industrial Enterprises Act, industries are classified as follows:

  • Cottage Industry – Operated with local skills and small capital, often traditional in nature.

  • Small Industry – Fixed assets not exceeding NPR 100 million (excluding land and building).

  • Medium Industry – Fixed assets between NPR 100 million and NPR 250 million.

  • Large Industry – Fixed assets exceeding NPR 250 million.

The classification determines licensing authority, environmental assessment requirements, and available government facilities.

1: Company Registration

Before applying for industry registration, the business must be incorporated under the Company Act, 2063 through the Office of the Company Registrar (OCR).

Documents required:

  • Application form for registration.

  • Proposed company name (approved through OCR portal).

  • Memorandum of Association (MoA) and Articles of Association (AoA).

  • Citizenship certificate copies of promoters.

  • Power of attorney (if applicable).

  • Proof of registered office address.

  • Bank deposit voucher showing paid-up capital.

Upon approval, the OCR issues a Certificate of Incorporation, providing the company with a separate legal identity.

2: Industrial Registration Application

After company incorporation, the applicant must register the manufacturing industry with the Department of Industry (DoI) or District Cottage and Small Industry Office (DCSI) based on the industry’s investment scale.

Documents required:

  • Application form prescribed by DoI or DCSI.

  • Copy of Company Registration Certificate.

  • MoA and AoA.

  • Citizenship copies of shareholders and directors.

  • Land ownership certificate or lease agreement of factory site.

  • Project profile or feasibility report.

  • PAN registration certificate.

  • Map and layout of industrial site.

  • Environmental clearance (IEE or EIA, if applicable).

Once verified, the respective authority issues an Industry Registration Certificate, which allows the entity to begin production activities.

3: Tax Registration (PAN and VAT)

Every manufacturing company must register with the Inland Revenue Department (IRD) for tax compliance.

  • Apply for Permanent Account Number (PAN) using company registration documents.

  • If annual turnover exceeds the threshold (NPR 2 million for goods), register for Value Added Tax (VAT).

  • Submit:

    • Company registration certificate.

    • MoA, AoA.

    • Proof of office address.

    • Copy of citizenship of authorized representative.

Tax registration ensures compliance with Nepal’s taxation system under the Income Tax Act, 2058 (2002) and VAT Act, 2052 (1996).

4: Environmental Clearance

Environmental clearance is mandatory for industries that may affect the environment. Depending on the scale and nature of production, either an Initial Environmental Examination (IEE) or Environmental Impact Assessment (EIA) is required under the Environment Protection Act, 2019 and Environment Protection Rules, 2020.

  • Cottage and small industries generally require no environmental assessment unless polluting.

  • Medium and large industries producing chemicals, cement, or heavy manufacturing must conduct IEE/EIA.

  • The environmental report is submitted to the Ministry of Forests and Environment (MoFE) or the Department of Industry for approval.

5: Factory Establishment and Location Approval

The industry must establish its factory or production facility at an approved location.

  • Obtain land use permission if the land is converted from agricultural to industrial purpose under the Land Use Regulation, 2022.

  • Construct factory layout as per approved map and safety standards.

  • Install necessary machinery and ensure compliance with fire, labor, and environmental norms.

  • Secure clearance from local municipal authority for construction and utilities (electricity, water, waste disposal).

6: Obtaining Industry Registration Certificate

Once documents and inspections are complete, the DoI or DCSI issues an Industry Registration Certificate under Section 4 of the Industrial Enterprises Act, 2076.

The certificate mentions:

  • Industry name and address.

  • Nature and type of manufacturing activity.

  • Capital investment.

  • Shareholding structure.

  • Location and validity of license.

This certificate serves as the official authorization to conduct manufacturing activities in Nepal.

7: Industry Operation and Licensing

Before starting operations, the industry must comply with the following:

  • Obtain a Factory Operation License from the local authority or labor office.

  • Register employees under the Social Security Fund (SSF).

  • Ensure workplace safety in accordance with the Labor Act, 2074 (2017) and Labor Rules, 2075 (2018).

  • Conduct equipment and electrical inspections as required by the Nepal Electricity Authority (NEA).

Only after these requirements are fulfilled can the manufacturing process legally commence.

8: Registration for Foreign Investment (If Applicable)

For foreign investors, approval must be obtained under the Foreign Investment and Technology Transfer Act (FITTA), 2019.

Documents required:

  • Project proposal.

  • Joint venture agreement.

  • Investor’s passport copy or company incorporation certificate (foreign entity).

  • Source of investment declaration.

  • Technology transfer agreement (if any).

Foreign investment applications are submitted to the Department of Industry or the Investment Board Nepal (IBN) depending on investment size.

9: Industry Renewal and Compliance

  • Every registered manufacturing industry must renew its registration annually with the Department of Industry or DCSI.

  • Renewal requires submission of updated financial statements, tax clearance certificates, and annual production details.

  • Non-renewal leads to suspension or cancellation of registration under Section 9 of the Industrial Enterprises Act, 2076.

10: Obtaining Additional Approvals (If Required)

Depending on product type, additional licenses may be required:

  • Nepal Bureau of Standards and Metrology (NBSM) – For products requiring quality certification.

  • Department of Food Technology and Quality Control (DFTQC) – For food manufacturing.

  • Department of Drug Administration (DDA) – For pharmaceuticals.

  • Customs Department – For machinery import permits.

Compliance with sectoral regulations ensures the legal distribution and export of products.

Documents Required for Manufacturing Industry Registration

  • Application form for registration

  • Company registration certificate

  • MoA and AoA

  • Citizenship certificates of promoters/directors

  • Project profile or feasibility report

  • Land ownership or lease deed

  • Environmental clearance certificate

  • PAN and VAT registration

  • Industrial layout and site plan

  • Power of attorney (if applicable)

  • Tax clearance certificate (for renewal)

Benefits of Industry Registration in Nepal

Registered manufacturing industries enjoy several benefits under the Industrial Enterprises Act, 2076, such as:

  • Tax concessions for priority industries.

  • Customs exemptions for importing machinery and raw materials.

  • Access to industrial estates and infrastructure.

  • Eligibility for government grants and export incentives.

  • Protection of intellectual property rights under Nepalese law.

Penalties for Non-Registration

Operating a manufacturing unit without registration violates the Industrial Enterprises Act. Penalties include:

  • Monetary fines as per Section 21 of the Act.

  • Seizure of equipment or shutdown of business.

  • Disqualification from obtaining future government licenses.

Frequently Asked Questions (FAQs)

Q1: What is the first step in registering a manufacturing industry in Nepal?
A1: The first step is to register the company under the Company Act, 2063, at the Office of the Company Registrar. After incorporation, apply for industrial registration with the Department of Industry or the District Cottage and Small Industry Office.

Q2: Can foreign investors register a manufacturing industry in Nepal?
A2: Yes. Foreign investors can register under FITTA, 2019, after obtaining approval from the Department of Industry or Investment Board Nepal. They must comply with Nepal Rastra Bank’s foreign investment procedures.

Q3: What is the difference between small and large industries?
A3: The difference is based on fixed asset investment. Small industries have assets under NPR 100 million, while large industries exceed NPR 250 million.

Q4: Is environmental clearance required for all industries?
A4: Not all. Cottage and small industries with minimal environmental impact may not need IEE or EIA. Medium and large industries producing chemicals, cement, or metal must conduct environmental assessments.

Q5: How long does it take to register a manufacturing industry?
A5: The registration process takes about 15 to 30 working days, depending on the completeness of documents and the approval timeline of the Department of Industry.

Q6: What are the annual renewal requirements?
A6: Renewal requires submission of tax clearance, financial statements, and production details to the Department of Industry or District Cottage and Small Industry Office each year.

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