KATHMANDU: Internet service providers (ISPs) in Nepal have yet to pay over Rs 1 billion in bandwidth dues to Indian companies for several months.

This delay is primarily due to a tax dispute between the government and the ISPs. As a result, the government has not provided foreign exchange facility to many such companies for the past one and a half years. As the dispute lingers on, payments to international internet bandwidth providers remain outstanding.

Subash Khadka, the Chief Executive Officer of the Internet Service Providers Association of Nepal (ISPAN), stated that the Nepal Telecommunications Authority and the Ministry of Communication and Information Technology have not provided the foreign currency exchange facility to them for 16 months. This delay has led to a significant backlog in payments to upstream service providers.

According to Khadka, Nepali ISPs owe more than Rs 1 billion to international bandwidth providers. He also said that bandwidth providers had previously suspended services due to non-payment, and there is a risk of this happening again. In a conversation with New Business Age, Khadka expressed frustration, saying, “Despite informing the ministry and authorities several times, the internet is always at risk of being cut off due to the lack of urgency in addressing this issue.”

On May 2, 2024, Airtel, an Indian company, stopped providing bandwidth to Nepali ISPs due to non-payment. However, after discussions at the government level, Airtel resumed the service. Currently, 13 ISPs in Nepal import internet bandwidth from abroad, and they have expressed concerns that they are unable to make payments because the government has not recommended the foreign currency exchange facility.

Government officials, however, argue that they are issuing foreign exchange facility, claiming that ISPs are misrepresenting the situation. According to Section 32 of the Telecommunication Act, 2053, and Rule 26 of the Telecommunication Regulations, 2054, ISPs are required to pay a 4% royalty on their total annual income. Additionally, under Regulation 5 (1) of the Rural Telecommunication Development Fund Regulations, 2068, ISPs must contribute 2% to the Rural Telecommunication Development Fund.

Spokesman Santosh Paudel stated that ISPs who have paid their dues are provided with the foreign exchange facility without interruption. However, he noted that recommendations cannot be given to companies that fail to comply with the rules and do not pay the required royalties to the government. Paudel added that some companies have had their recommendations withheld due to their failure to settle the dues despite repeated reminders.

A senior official from Worldlink, a leading ISP, mentioned that ISPs and network service providers have been regularly paying royalties and contributing to the Rural Telecommunication Development Fund (RTDF). However, due to confusion, royalties on non-telecom services like maintenance charges and certain RTDF dues have not been paid. The official added that although a court order has been issued regarding this matter, the full text of the order has yet to be released, leaving the payments pending. The Telecommunication Authority claims that ISPs owe approximately Rs 3 billion in such taxes.

The issue reached the Supreme Court through a parliamentary committee, and three months ago, the court ordered ISPs to pay the taxes. Worldlink's petition filed at the Supreme Court, arguing that they should not pay the taxes determined by the government, was dismissed on May 12, 2024. ISPs are now hesitating to make the payments, citing the lack of clarity in the court order. With the legal avenues nearly exhausted, ISPs are considering raising demands such as installment facilities and interest waivers from the government. However, officials have indicated that the government is not inclined to grant any such concessions.