Provincial governments as per the schedules of the constitution have specific authority to levy and collect taxes under certain headings. Motor Vehicle Tax, Agricultural Income Tax and entertainment tax are taxes over which the provincial governments have specific jurisdiction. Furthermore, Motor Vehicle Tax and Entertainment tax collected is shared between the Provincial and local governments. Motor Vehicle tax is shared in the ratio of 60-40 i.e. 60 percent is retained by the Provincial government, while 40 percent is transferred to the relevant local governments based on the parameters designed by the National Natural Resources and Fiscal Commission. Entertainment tax is shared in the ratio of 40-60 i.e. 40 percent is transferred to the provincial government and 60 percent is retained by the Local government. Agriculture income tax does not come under any sharing arrangements and is completely retained by the provincial governments.
Motor vehicle tax is collected on the basis of the engine specification of the vehicle in question. It is a yearly tax paid to Provincial Transport offices. The rates of the tax is detailed out in the yearly finance act of the provincial governments.
Agricultural income is levied on income earned form agricultural activity. It is largely based on a self-assessment system and is levied and collected by the Provincial governments through the Agricultural Knowledge Centers. Province 1 and 2 do not levy any agricultural income tax, while Karnali Province has not levied any agricultural income for this fiscal year.
Entertainment tax is levied on activities such as circus, movie theaters, drama theaters, fare, magic show, concert etc. based on the nature of operation it may be levied as a percentage of the ticket price as a lump sum amount based on the number of days in operation. The tax rate is fixed by the provincial government while the collection and administration of taxation is done by the local governments.