Establishing a liquor/distillery or brewery in Nepal requires strict compliance with industrial, environmental, and excise regulations. This updated guide outlines the legal framework, regulatory approvals, and the correct licensing process, with the Industry and Investment Promotion Board (IIPB) as the final licensing authority for liquor production.
Key Regulatory Authorities
The following government bodies play crucial roles in the regulation and licensing of alcohol production:
- Industry and Investment Promotion Board (IIPB): Final licensing authority for liquor production.
- Department of Industry (DOI): Reviews applications and coordinates technical approvals.
- Department of Food Technology and Quality Control (DFTQC): Ensures product safety and hygiene standards.
- Ministry of Forests and Environment (MoFE): Grants environmental clearances.
- Inland Revenue Department (IRD): Issues excise licenses and manages tax compliance.
- Department of Revenue Investigation (DRI): Investigates illegal alcohol activities.
- Ministry of Industry, Commerce and Supplies (MoICS): Oversees industrial policy and coordination.
Legal Framework
Liquor production in Nepal is governed by:
- Industrial Enterprises Act, 2076 (2019)
- Excise Duty Act, 2058 (2002)
- Liquor Control Rules, 2031 (1974)
- Food Act, 2023 (1966)
- Environment Protection Act, 2076 (2019)
Note: The Excise Duty Act and Liquor Control Rules require that producers obtain both a production license from the IIPB and an excise license from the IRD.
Minimum Capital Requirement
Per current policy and Gazette notices:
| Scale | Minimum Capital |
|---|---|
| Small-scale | NPR 10 million |
| Medium-scale | NPR 50 million |
| Large-scale | NPR 100 million+ |
| Foreign Investors | NPR 20 million per investor |
Foreign investment must comply with the minimum threshold set by the notice published in the Nepal Gazette on 14 November 2022.
Documents Required
Applicants must submit the following:
- Company registration certificate (OCR)
- PAN/VAT registration (IRD)
- Detailed project proposal or feasibility study
- Environmental clearance (EIA/IEE)
- Land ownership or lease agreement
- Factory layout and building permit
- Equipment list and production capacity details
- Quality and safety protocols (GMP, HACCP, etc.)
- Proof of capital and financial statements
- Shareholder details (with FDI disclosures, if applicable)
- Local municipality’s No Objection Certificate (NOC)
- Fire safety and security measures
Step-by-Step Process for Liquor Production License
1. Company Incorporation
- Register with the Office of the Company Registrar (OCR).
- Obtain PAN/VAT from the Inland Revenue Department (IRD).
2. Prepare Technical and Environmental Documents
- Develop a project proposal, site plan, and feasibility report.
- Conduct an Initial Environmental Examination (IEE) or Environmental Impact Assessment (EIA).
3. Submit Application to the IIPB
- The completed license application, project documents, environmental reports, and financial proof must be submitted directly to the Industry and Investment Promotion Board (IIPB).
- Applications involving foreign investment or large-scale production must fulfill additional FDI compliance requirements.
4. IIPB Evaluation and Interagency Review
- IIPB forwards the application for technical review to the Department of Industry, DFTQC, MoFE, and local bodies.
- These agencies conduct site inspections and verify environmental, health, and safety compliance.
5. Environmental Clearance
- IEE or EIA must be submitted to the Ministry of Forests and Environment or the Department of Environment.
- Clearance is a prerequisite for further licensing.
6. Excise License from IRD
- Apply separately to the Inland Revenue Department for an excise license.
- The IRD reviews production volume, equipment, and capacity for tax registration.
7. Final Approval and License Issuance
- Upon satisfactory evaluation and compliance checks, the IIPB issues the Liquor Production License.
- Simultaneously, the IRD grants the Excise License, allowing lawful production and sale of alcohol.
Post-License Compliance
License holders must:
- File monthly and annual excise duty returns with the IRD.
- Undergo periodic inspections by DFTQC and DRI.
- Maintain inventory, production, and distribution logs.
- Renew licenses annually with IIPB and IRD.
- Maintain GMP and safety standards as per the Labor Act, 2074.
Approximate Timeline
| Stage | Duration (Estimated) |
|---|---|
| Company registration | 1–2 weeks |
| Environmental clearance (EIA) | 2–3 months |
| Interagency inspections | 1–2 months |
| Excise license | 1 month |
| Final license from IIPB | 6–12 months total |
Cost Estimate
| Cost Head | Range |
|---|---|
| Government fees | NPR 10,000 – 50,000 |
| Annual licensing fee (IIPB/IRD) | NPR 100,000 – 500,000 |
| Environmental report (EIA/IEE) | NPR 500,000 – 2 million |
| Equipment and setup | Project-based |
Other Licenses Required
| License Type | Issuing Authority |
|---|---|
| Excise License | Inland Revenue Department |
| Warehouse & Distribution Permit | Local Government / Department of Commerce |
| Retail Sales License | Local Government Office |
| Export/Import Permit | Department of Customs / Ministry of Commerce |
Employee Safety and Compliance
Producers must:
- Implement fire suppression and security systems
- Enforce GMP, HACCP, and worker safety standards
- Comply with the Labor Act, 2074 (2017)
- Train workers and maintain accident logs
Frequently Asked Questions (FAQs)
1. Who issues the liquor production license in Nepal?
The Industry and Investment Promotion Board (IIPB) is the competent authority to issue liquor production licenses. The Department of Industry and other agencies provide technical recommendations and inspections.
2. Can foreigners invest in alcohol production?
Yes, but they must:
- Meet the NPR 20 million minimum foreign investment threshold
- Obtain IIPB approval and register with DOI
- Follow all FDI regulations under Nepalese law
3. What is the role of the Department of Industry?
The DOI reviews technical specifications, coordinates inspections, and recommends license approval to the IIPB.
4. Is excise registration mandatory?
Yes. You must register with the IRD and obtain an excise license in addition to the production license from IIPB.
5. What happens if I operate without a license?
Penalties include:
- Seizure of assets and closure of operations
- Fines under the Excise Duty Act
- Legal action initiated by the Department of Revenue Investigation (DRI)
Conclusion
Starting an alcohol production business in Nepal requires navigating a multi-agency process led by the Industry and Investment Promotion Board. Given the capital investment, legal intricacies, and environmental and excise obligations, businesses are strongly advised to seek professional legal and technical consultation to ensure timely and lawful setup.