The textile and garment industry in Nepal has been a major contributor to the national economy, employment, and export earnings. Investors and entrepreneurs seeking to establish textile or garment factories in Nepal must follow the legal, regulatory, and institutional processes under Nepalese law. The registration process involves compliance with the Company Act 2063 (2006), Industrial Enterprises Act 2076 (2019), Foreign Investment and Technology Transfer Act (FITTA) 2019, Labor Act 2074 (2017), and tax registration obligations under the Income Tax Act 2058 (2002) and Value Added Tax Act 2052 (1996).
This article prepared by Medha Law and Partners – a leading corporate law firm in Nepal provides a detailed, factual, and stepwise explanation of textile and garment industry registration in Nepal, including applicable laws, authorities, documents required, process flow, cost, timeline, compliance requirements, and post-registration obligations.
Introduction
Nepal has witnessed a steady rise in textile and garment industries due to increasing global demand, favorable trade agreements such as the Generalized System of Preferences (GSP), and government initiatives to promote industrial development. The Industrial Enterprises Act 2076 recognizes textile and garment manufacturing as a classified industry, requiring proper registration, environmental compliance, and licensing before operation. Investors must register the entity either as a Private Limited Company, Public Limited Company, or Partnership Firm depending on the scale. For foreign investors, registration is required at the Department of Industry (DOI) and approval from the Department of Foreign Investment (DoFI) under FITTA 2019.
Legal Framework for Textile and Garment Industry in Nepal
The textile and garment sector is governed by multiple laws, including:
-
Company Act 2063 (2006) – for incorporation of the company.
-
Industrial Enterprises Act 2076 (2019) – governs registration and operation of industries.
-
Foreign Investment and Technology Transfer Act (FITTA) 2019 – regulates foreign investment in the sector.
-
Labor Act 2074 (2017) – regulates employment, wages, and workplace compliance.
-
Income Tax Act 2058 (2002) – sets corporate tax obligations.
-
Value Added Tax Act 2052 (1996) – requires VAT registration.
-
Environment Protection Act 2076 (2019) – requires Initial Environmental Examination (IEE) or Environmental Impact Assessment (EIA) depending on scale.
Authorities Involved
-
Office of the Company Registrar (OCR) – company incorporation.
-
Department of Industry (DOI) – industry registration.
-
Department of Foreign Investment (DoFI) – approval of foreign investment.
-
Inland Revenue Department (IRD) – PAN and VAT registration.
-
Social Security Fund (SSF) – labor compliance and contribution registration.
-
Ministry of Forest and Environment (MoFE) – approval of IEE/EIA.
-
Local Municipality/Ward Office – land and operation-related approvals.
Documents Required for Textile and Garment Industry Registration in Nepal
Applicants must prepare and submit the following documents for registration:
-
Application form as prescribed under Industrial Enterprises Act 2076.
-
Memorandum and Articles of Association (MOA & AOA).
-
Citizenship certificates of promoters (for individuals).
-
Company Registration Certificate (for companies).
-
Tax clearance certificate of promoters.
-
Feasibility study report of the textile or garment factory.
-
Land ownership certificate or lease agreement.
-
Building design approval from local authority.
-
Initial Environmental Examination (IEE) or Environmental Impact Assessment (EIA) report.
-
List of machinery and equipment with import details.
-
Proposed employment plan and labor compliance documents.
-
Proof of financial resources and bank statements.
-
PAN registration documents.
-
Power of Attorney (if applicable).
Step-by-Step Process of Textile and Garment Industry Registration
1: Company Incorporation
-
Register the business at the Office of the Company Registrar (OCR) under the Company Act 2063.
-
Submit MOA, AOA, and required documents.
2: Apply for Industry Registration at DOI
-
Submit application form with feasibility report and company documents.
-
Obtain the Industry Registration Certificate under Industrial Enterprises Act 2076.
3: Obtain Foreign Investment Approval (if applicable)
-
Submit application to DoFI under FITTA 2019.
-
Provide investment proposal and capital transfer plan.
4: Register with Inland Revenue Department (IRD)
-
Obtain Permanent Account Number (PAN).
-
Register for VAT under Value Added Tax Act 2052.
5: Environmental Compliance
-
Conduct IEE for medium-scale factories.
-
Conduct EIA for large-scale factories.
-
Obtain approval from Ministry of Forest and Environment (MoFE).
6: Social Security and Labor Compliance
-
Register employees with Social Security Fund (SSF).
-
Comply with Labor Act 2074 provisions on employment contracts, wages, and workplace safety.
7: Operation License from Local Authority
-
Obtain operation permit from the respective municipality/ward office.
-
Submit building permits and safety compliance documents.
Cost of Textile and Garment Industry Registration in Nepal
-
Company incorporation fee: NRs. 10,000 – 50,000 depending on capital.
-
Industry registration fee at DOI: NRs. 15,000 – 100,000 depending on scale.
-
Environmental approval cost: NRs. 200,000 – 1,000,000 for IEE/EIA.
-
PAN and VAT registration fee: Minimal service charges.
-
Professional service costs: Legal, accounting, and consultancy fees vary.
Timeline for Registration
-
Company registration: 7–10 days.
-
Industry registration at DOI: 15–30 days.
-
Foreign investment approval (if applicable): 30–60 days.
-
Environmental approval (IEE/EIA): 3–6 months.
-
Tax and social security registration: 3–7 days.
Overall estimated timeline: 3–6 months depending on project size and compliance requirements.
Compliance Obligations After Registration
-
Submit annual returns to OCR.
-
Renew industry license at DOI.
-
File tax returns with IRD.
-
Pay SSF contributions for employees.
-
Maintain labor contracts and workplace safety.
-
Ensure environmental monitoring and reporting.
Advantages of Registering Textile and Garment Industry in Nepal
-
Legal recognition for domestic and export operations.
-
Eligibility for tax incentives under Industrial Enterprises Act 2076.
-
Access to preferential trade benefits like GSP and SAFTA.
-
Protection of investment under FITTA 2019.
-
Ability to acquire land, machinery, and labor legally.
Challenges in Registration
-
Delay in EIA/IEE approvals.
-
Complicated land acquisition process.
-
Compliance with multiple authorities.
-
High initial investment cost.
FAQs on Textile and Garment Industry Registration in Nepal
Q1. Which authority registers textile and garment industries in Nepal?
The Department of Industry (DOI) registers textile and garment industries under the Industrial Enterprises Act 2076, after company incorporation at the Office of the Company Registrar (OCR).
Q2. Can foreign investors establish textile factories in Nepal?
Yes, foreign investors can establish textile and garment factories in Nepal after obtaining approval from the Department of Foreign Investment (DoFI) under FITTA 2019.
Q3. Is environmental clearance required for garment factories?
Yes, all textile and garment factories must obtain environmental clearance through IEE or EIA depending on scale, as mandated by the Environment Protection Act 2076.
Q4. How long does industry registration take?
Industry registration at the DOI generally takes 15–30 days, but the overall process including environmental approvals and tax registration can take 3–6 months.
Q5. What are the tax obligations for textile and garment companies?
Textile and garment companies must obtain PAN, register for VAT, and comply with the Income Tax Act 2058 by filing corporate tax returns annually.