Kathmandu-Information Technology (IT) service exporters have not received VAT refunds they are legally entitled to for nearly two years.

The government has held back these refunds since 2024. At the time, the Inland Revenue Department suspended VAT reimbursements across the sector, citing the COTIVITI Nepal case.

Under existing law, exported services are subject to zero-rated VAT. This allows companies to claim refunds on input VAT paid. Other sectors continue to receive such refunds. IT firms previously did as well.

The dispute began after authorities argued that services exported by COTIVITI to its own affiliated company should not qualify as exports. Following the case and scrutiny from the Commission for the Investigation of Abuse of Authority, tax officials have avoided processing VAT refunds for IT service exports.

Entrepreneurs say the policy contradicts the government’s push to grow the digital economy. They argue that firms driving IT exports are being denied basic support.

Industry estimates show more than Rs 400 million in pending claims. Companies say the delay has created financial strain. They have repeatedly asked successive governments to resolve the issue.

After the current government took office, the industry body NAS-IT raised the matter in a meeting with Finance Minister Dr Swarnim Wagle.

Representatives say the minister assured them the issue would be addressed.

Entrepreneurs now expect a resolution soon.