Classification of Industries in Nepal
Industries in Nepal are classified based on investment, nature of activity, and scale. The Industrial Enterprises Act, 2076 categorizes industries into:
- Micro Enterprises
- Cottage Industries
- Small Enterprises
- Medium Enterprises
- Large Industries
The classification determines registration requirements, tax liabilities, and compliance responsibilities.
Micro, Cottage, Small, and Medium Types
Under the Industrial Enterprises Act, micro and cottage industries have simplified procedures. Definitions:
- Micro: Up to NPR 500,000 investment, fewer than 10 workers.
- Cottage: Traditional skills, local resources, small scale.
- Small: Up to NPR 100 million investment.
- Medium: NPR 100 million to NPR 250 million. All must register with the Department of Cottage and Small Industries or Department of Industry, depending on category.
Manufacturing Industry Registration Need
Manufacturing units producing goods in Nepal must register under the Industrial Enterprises Act. They require:
- Industry registration
- PAN registration
- Environmental clearances (if applicable) These include textiles, food processing, cement, iron, and plastic industries.
Service-Based Industry Registration Rules
Service industries such as consulting, healthcare, education, and hospitality must also register. They are governed under the same Act and must:
- Choose correct industry classification
- Obtain local authority approvals (if applicable)
- Fulfill any special sectoral regulation (education, health, etc.)
Agro-Based Industry Requirements
Industries processing agricultural products are considered agro-based. These include:
- Dairy processing
- Food packaging
- Agro tools production Such industries must register with the Department of Industry or Cottage and Small Industry, based on scale. Some require approvals from the Ministry of Agriculture.
Technology and IT-Based Industries
Tech and IT industries including software development, IT-enabled services, and digital solutions are recognized under the Industrial Enterprises Act. Requirements include:
- Industry registration
- PAN and tax registration
- Optional foreign investment approval if applicable They may require coordination with the Ministry of Communication and Information Technology.
Foreign Investment Industry Categories
Industries with foreign ownership or investment must follow Foreign Investment and Technology Transfer Act (FITTA) 2075. Categories include:
- Joint ventures
- 100% foreign-owned firms These must register with:
- Department of Industry
- Nepal Rastra Bank
- Inland Revenue Department
Environmental Impact-Based Classification
Industries are classified by their environmental impact:
- Non-polluting
- Less polluting
- Highly polluting The Environment Protection Act, 2076 requires:
- IEE or EIA approval
- Ministry of Forest and Environment clearance This applies to hydropower, cement, chemicals, etc.
Industry Type and Law Applicability
Each industry type follows different laws:
- Industrial Enterprises Act for registration
- FITTA for foreign industries
- Environment Protection Act for clearance
- Local Self Governance Act for municipal-level registration
Registration by Industry Sector
Sector-specific authorities may apply:
- Tourism Board for hospitality
- Nepal Medical Council for health services
- Ministry of Education for schools Registration must align with both central and sectoral regulations.
Regulated and Unregulated Industries
Regulated industries include:
- Financial services
- Healthcare
- Education
- Telecommunication They require licenses and periodic audits. Unregulated industries (e.g., handicrafts) still require registration but have fewer restrictions.
Industries Requiring Extra Approvals
Some industries need additional approvals:
- Pharmaceuticals: Department of Drug Administration
- Hydropower: Ministry of Energy
- Aviation: Civil Aviation Authority Such approvals are mandatory before operation.
Export-Oriented Industry Classification
Export-focused industries qualify for incentives. They include:
- Readymade garments
- Handicrafts
- Agro-exports They must register as exporters and comply with customs and NRB requirements.
Industry Type and Licensing Needs
Licenses vary by industry type:
- Manufacturing: Industry Registration + Tax + Local Authority
- Services: Sectoral License + Tax Registration
- Agro/Tech: MoA or MoCIT approval All industries must obtain PAN and follow VAT provisions if applicable.
Legal Guidance on Industry Types
Legal advice ensures correct classification and registration. MedhaCorpLaw offers:
- Industry type verification
- Document preparation
- Sectoral compliance advisory
- Full legal representation during registration
FAQs
Which industries must be registered?
All industries, regardless of size or nature, must register under the Industrial Enterprises Act.
Is it only for large industries?
No, micro, cottage, small, medium, and large industries all require registration.
What about service-based firms?
Service-based firms also require industry registration and tax registration.
Are agro-industries included?
Yes, agro-processing and farming-related industries must register.
How is industry type decided?
By investment amount, number of workers, and nature of activity.
Is registration based on income?
No, it is based on capital investment and business type.
What are export industries?
Industries mainly producing goods or services for export markets.
Are IT firms industries too?
Yes, IT companies must register under the Industrial Enterprises Act.
Do small industries register too?
Yes, all industry sizes require registration.
Are cottage industries exempt?
No, cottage industries must register with the local office or DOI.
MedhaCorpLaw assists with full legal support for industry registration in Nepal including classification, document preparation, and compliance services.