Introduction

Nepal’s digital economy has expanded rapidly in the last decade, bringing with it a surge in online businesses that sell products and services through websites, mobile applications, and social media platforms. However, this growth has also prompted the need for a clear legal framework to regulate online commercial activities, protect consumers, and ensure fair competition. Until recently, online commerce in Nepal operated largely in a legal gray area, governed indirectly through general commercial and consumer protection laws. This changed significantly with the introduction of the Electronic Commerce Act, 2081 (2025), which established specific legal requirements for individuals and entities engaged in online selling.

Understanding these legal requirements is crucial for any person or company wishing to sell goods or services online in Nepal. Compliance not only legitimizes the business but also protects it from penalties, ensures customer trust, and allows participation in formal economic systems such as taxation, banking, and logistics. The legal framework encompasses several areas, including business registration, e-commerce registration, taxation, consumer protection, data handling, advertising, and cross-border trade.

The following sections provide a detailed overview of the legal requirements to sell online in Nepal, referencing the primary laws, governmental agencies, procedures, and enforcement mechanisms that govern this domain.

Legal Basis for E-Commerce Regulation in Nepal

The primary legal basis for regulating online selling in Nepal is the Electronic Commerce Act, 2081 (2025). This Act was passed to establish clear standards for the registration, operation, and monitoring of online businesses. Prior to its enactment, online sellers were subject to the Companies Act, 2063 (2006), Consumer Protection Act, 2075 (2018), Electronic Transactions Act, 2063 (2008), and tax-related laws such as the Income Tax Act, 2058 (2002) and Value Added Tax Act, 2052 (1996). While these older laws provided general provisions applicable to businesses, they lacked detailed guidance specific to digital trade and online transactions.

The E-Commerce Act, 2025 was designed to fill this gap. It clearly defines what constitutes e-commerce, establishes the need for registration of online businesses, prescribes consumer protection measures, and grants regulatory powers to the Department of Commerce, Supplies, and Consumer Protection (DoCSCP). The Act extends its jurisdiction not only to domestic online sellers but also to foreign businesses offering goods and services to Nepali consumers through digital platforms.

Definition of E-Commerce and Scope of Application

Under the Electronic Commerce Act, 2081, e-commerce is defined as any activity involving the buying or selling of goods or services using electronic means. This includes websites, mobile applications, and even social media platforms that facilitate transactions. The Act explicitly recognizes different categories of e-commerce operators, such as platform-based businesses (marketplaces that connect buyers and sellers) and direct sellers (businesses selling their own goods or services online).

The law applies to all entities engaged in such transactions, regardless of the scale or medium. It covers both registered companies and individuals conducting business through informal channels such as Facebook, Instagram, or TikTok. Furthermore, it applies equally to domestic businesses operating within Nepal and to foreign entities targeting Nepali consumers through online platforms. This broad scope ensures that all online commercial activities fall under regulatory oversight, thereby protecting consumers and maintaining fair market practices.

Mandatory Business Registration

The first legal requirement for any online seller in Nepal is to ensure proper business registration. Every commercial activity must operate under a legally recognized entity. Depending on the nature and size of the business, registration may take place under the Office of Company Registrar (OCR) for companies, the Department of Industry for industrial ventures, or the local ward office or municipality for small-scale traders and individual entrepreneurs.

A registered business must have a registration certificate and a Permanent Account Number (PAN) issued by the Inland Revenue Department (IRD). Those who exceed the annual turnover threshold set by the Value Added Tax Act are required to obtain VAT registration. The law prohibits conducting any form of business, including online sales, without proper registration. Unregistered sellers may face penalties, including fines and the confiscation of goods.

This step forms the legal foundation upon which all other compliance measures depend. Without legal entity registration, a seller cannot register as an e-commerce operator, cannot issue valid invoices, and cannot integrate with banking or digital payment systems.

E-Commerce Business Registration

Beyond general business registration, the E-Commerce Act, 2081 requires every online business to register specifically as an e-commerce operator. This registration is to be completed with the Department of Commerce, Supplies and Consumer Protection (DoCSCP), which serves as the regulatory authority for e-commerce activities in Nepal.

The registration process requires submission of information such as the business name, type of operation (direct seller or intermediary), registration number from OCR or local authority, tax details, physical address, website or application address, and contact information for consumer complaints. The purpose of this process is to ensure accountability, traceability, and consumer protection.

For businesses already operating online prior to the implementation of the Act, a grace period was provided to complete registration. After the deadline, which expired in mid-2025, any business conducting online sales without e-commerce registration became illegal. The law empowers the Department to take enforcement action against such businesses, including imposing fines and ordering the suspension of online activities.

Disclosure and Transparency Requirements

Transparency is a key element of lawful e-commerce operation in Nepal. The law mandates that all online sellers disclose essential information about their products or services clearly on their digital platforms. This includes details such as the name of the product, specifications, price, warranty or guarantee conditions, delivery charges, manufacturing or expiry dates where applicable, and the country of origin.

The E-Commerce Act, 2081 requires sellers to update this information regularly and prohibits misleading representations. If a product received by a customer differs from the one advertised—whether in design, weight, origin, or features—the buyer is entitled to a refund or replacement. Sellers must also display their business registration number, tax identification, and contact information to ensure traceability and consumer confidence.

Failure to provide transparent and accurate information constitutes an offence under the Act and may result in penalties or suspension of registration.

Consumer Protection Provisions

The Consumer Protection Act, 2075 applies fully to online transactions and works in tandem with the E-Commerce Act. It guarantees several rights to online consumers, including the right to safety, the right to information, the right to choose, and the right to compensation.

Online sellers are required to provide accurate information about the nature and quality of goods and services. They must honor warranties and guarantees, provide refunds in cases of defects or misrepresentation, and ensure timely delivery. The law also obligates sellers to establish a mechanism for handling consumer complaints.

Where an intermediary platform is involved, such as an online marketplace connecting multiple sellers and buyers, the platform operator is responsible for maintaining contractual agreements with each seller to ensure compliance. The intermediary may also be held jointly liable in cases where it fails to act against non-compliant sellers.

These provisions aim to enhance consumer confidence in online transactions and ensure that digital commerce aligns with the broader principles of fairness and accountability found in traditional commerce.

Taxation and Invoicing Requirements

The taxation regime applicable to online sellers in Nepal mirrors that of traditional businesses. Every online seller must comply with the Income Tax Act, 2058 and the Value Added Tax Act, 2052. Businesses must obtain a Permanent Account Number (PAN) and, where required, a VAT certificate. They are obligated to issue tax invoices for every sale, maintain proper accounting records, and file periodic tax returns.

The use of electronic invoicing systems is encouraged, as they provide a verifiable trail of transactions and help ensure tax compliance. Online sellers must also charge VAT on applicable goods and services, collect it from consumers, and remit it to the Inland Revenue Department. Failure to comply with these tax obligations can result in financial penalties and possible suspension of business operations.

In addition, payment gateways and digital wallet operators are required to ensure that the businesses using their platforms are tax-compliant. This creates an interconnected framework where tax enforcement extends beyond individual sellers to the broader digital ecosystem.

Data Protection and Privacy

While Nepal does not yet have a dedicated Data Protection Act, the Electronic Transactions Act, 2063 and the E-Commerce Act, 2081 contain provisions aimed at protecting personal information. Sellers are required to handle customer data responsibly, ensuring that it is collected lawfully, stored securely, and not shared without consent.

The E-Commerce Act mandates that online businesses adopt reasonable security measures to protect consumer data from unauthorized access, disclosure, alteration, or destruction. Breach of these obligations can result in penalties and potential civil liability. The government is also working on a draft Data Protection Bill, which, when enacted, will further strengthen the legal framework governing personal information in digital commerce.

Advertising and Misrepresentation

Advertising and marketing activities conducted online are subject to the same standards of honesty and fairness as offline advertising. The Consumer Protection Act and the E-Commerce Act both prohibit false or misleading advertisements. Sellers must ensure that all promotional content, descriptions, images, and claims accurately represent the goods or services offered.

If an online seller is found to have engaged in deceptive marketing practices—such as false discounts, counterfeit branding, or hidden charges—the authorities may impose fines and order compensation to affected consumers. In extreme cases, the business may lose its registration.

Cross-Border E-Commerce Regulations

The E-Commerce Act also addresses the issue of cross-border online trade. Any foreign business that offers goods or services to Nepali consumers through electronic means is required to register locally or appoint an authorized local representative. This ensures that foreign sellers are accountable under Nepali law for consumer protection, taxation, and dispute resolution.

Similarly, domestic businesses selling to customers abroad must comply with international trade, customs, and export regulations. The law emphasizes that online transactions crossing national boundaries must respect the jurisdictional authority of both Nepal and the destination country.

Enforcement and Penalties

The Department of Commerce, Supplies and Consumer Protection (DoCSCP) is responsible for monitoring and enforcing compliance with e-commerce regulations. It has the authority to inspect business records, websites, and physical premises, as well as to investigate consumer complaints.

Operating an unregistered online business is now a punishable offence. Penalties for violations range from fines of up to NPR 200,000 for failure to register, to fines of up to NPR 500,000 or imprisonment for offences such as fraud, false advertising, or misuse of consumer data. The Department may also suspend or revoke registration in cases of repeated or serious violations.

The law provides for a quasi-judicial process through which disputes can be settled and appeals filed. This ensures fairness in enforcement and prevents arbitrary administrative action.

Legal Documentation and Record-Keeping

Online sellers are required to maintain proper records of all transactions, communications, and consumer complaints. These records must be kept securely and made available to authorities upon request. Maintaining detailed documentation not only ensures compliance but also provides protection in case of disputes.

Contracts executed electronically—such as online terms of sale or clickwrap agreements—are recognized under the Electronic Transactions Act as valid and enforceable, provided they meet the standard requirements of consent and mutual agreement. This legal recognition supports the growing reliance on digital contracts in the e-commerce sector.

Conclusion

The legal landscape for online selling in Nepal has evolved considerably with the enactment of the Electronic Commerce Act, 2081 (2025). Selling goods or services online now requires full compliance with a comprehensive set of legal obligations that span business registration, e-commerce registration, taxation, consumer protection, data handling, and advertising.

While the new framework imposes stricter obligations on sellers, it also creates a safer, more transparent, and trustworthy environment for both businesses and consumers. Compliance with these laws not only avoids penalties but enhances credibility and long-term sustainability.

Nepal’s shift toward a regulated digital economy marks an important step in aligning its commercial practices with global standards. As the regulatory environment continues to evolve—with future developments expected in data protection, electronic payments, and cross-border e-commerce—it is essential for online sellers to remain informed and proactive. Legal compliance is no longer just an administrative requirement; it is a strategic foundation for success in Nepal’s growing online marketplace.