KATHMANDU: The country's internet service providers (ISPs) have decided to comply with the government's demands to clear taxes related to rural telecommunications development fees and royalty charges on maintenance. Initially, the ISPs had refused to pay these taxes, arguing that they were not obligated to do so on maintenance fees collected from customers. However, they have now agreed to settle the outstanding amounts, totaling Rs 3.64 billion since the fiscal year 2017/18, following a recent Supreme Court verdict instructing them to adhere to government guidelines.

Despite their earlier resistance, ISPs are now preparing to clear the dues as per the Supreme Court's ruling. Discussions are underway between the ISPs and the Nepal Telecommunications Authority (NTA) to determine the modality for settling the outstanding fees. ISPs, like WorldLink Communications Ltd, are awaiting the full text of the Supreme Court's decision before moving forward with payment arrangements.

The government and ISPs have been engaged in a prolonged dispute over tax obligations, particularly concerning non-telecommunication services. The government has been urging ISPs to clear backlog payments for services such as web hosting, disaster recovery, and cloud services. This issue has been highlighted in reports by the Office of the Auditor General, indicating a long-standing disagreement between the two parties.

While ISPs argue that taxing non-telecommunication components goes against the law, the government has maintained its stance on collecting taxes for these services. A study team was previously formed by the Ministry of Communications and Information Technology (MoCIT) to investigate tax evasion by ISPs. Despite parliamentary directives exempting ISPs from taxes on non-telecommunication components in the past, the dispute persists.

Furthermore, amid the ongoing controversy, MoCIT has declined to recommend foreign exchange facilities from Nepal Rastra Bank for ISPs to settle their outstanding dues to Indian companies. This decision resulted in significant disruptions to internet services for Nepalis three weeks ago when ISPs failed to clear dues owed to Indian bandwidth providers, underscoring the complexity and ramifications of the tax dispute.