In the first six months of the current fiscal year, the government collected Rs 163.44 billion in revenues against the target of Rs 168.18 billion. The miss is seen as a blow to the government whose focus has just been on revenue collection rather that spending the collected funds in development projects.

According to the Finance Ministry, the shortfall in revenue collection was due to inadequate VAT collection. Although the government aimed to collect Rs 51.13 billion in VAT in the first half, it was able to collect only Rs 47.91 billion, according to a Finance Ministry source.

Both the Inland Revenue Department (IRD) and

the Department of Customs (DoC) failed missed their VAT targets.

The ministry attributed the low VAT collection to a decline in production and slowed imports as a result of the strike called by the CPN-Maoist ahead of the Constituent Assembly (CA) election.

In the review period, government expenditure in development projects stood at just 13 percent of the allocated amount. Around Rs 3

billion was spent for purchasing weapons for security

agencies.

As the government is one of the main customers of the private sector, low capital expenditure also affected industrial production. “VAT collection from the service sector also decreased,” said a ministry official.

Customs revenue collection was also Rs 70 million short of the target due to a drop in automobile imports as a result of the strengthening of the US dollar against the Nepali rupee.

Although the income tax collection surpassed the target, ministry officials said it was not much encouraging. Compared to the target of Rs 33.98 billion, the government collected Rs 34.26 billion in income tax.