Nepal’s growing construction sector has created steady demand for stone, sand, gravel, and crushed aggregate. Because of this demand, many foreign investors are interested in setting up a stone crusher industry, sand extraction business, or aggregate supply company in Nepal. However, this sector is treated differently from most other industries because it involves the extraction of natural resources, use of riverbeds, and heavy environmental impact. Anyone planning to register a stone, sand, or crusher business in Nepal must follow rules set out in the Companies Act 2063, the Mines and Minerals Act 2042, the Foreign Investment and Technology Transfer Act (FITTA) 2075, the Income Tax Act 2058, and directives issued by Nepal Rastra Bank (NRB). This article explains, in simple terms, what the law says about registering this type of industry and what foreign investors should expect at each stage.
Legal Framework Governing the Stone, Sand, and Crusher Industry in Nepal
Before applying for registration, it is useful to understand which laws apply to a stone crushing, sand mining, or aggregate business in Nepal. Several different government bodies are involved, and each one enforces a separate law.
The Companies Act 2063 (2006)
Every business that wants to operate as a private limited or public limited company in Nepal, including a crusher or aggregate company, must be incorporated under the Companies Act 2063. This law is administered by the Office of the Company Registrar (OCR) and sets out the rules for company formation, share structure, directors, and annual compliance filings. A foreign investor setting up a stone or sand business must register a company under this act before any industrial or mining license can be issued.
The Mines and Minerals Act 2042 (1985) and Its Amendments
Stone quarrying and crushing fall under the category of mineral-based industries. The Mines and Minerals Act 2042, along with its later amendments, governs the exploration, extraction, and processing of minerals, including construction materials such as stone, boulder, gravel, and sand. A license from the Department of Mines and Geology is generally required before quarrying activities can begin, in addition to company and industry registration.
Local Government Operation Act 2074
Extraction of sand, gravel, and boulders directly from riverbeds is largely regulated at the local level. The Local Government Operation Act 2074 gives municipalities and rural municipalities authority over riverbed material collection within their boundaries. This means that a sand or river-based aggregate business may need approval from the concerned local government in addition to national-level registration.
The Foreign Investment and Technology Transfer Act 2075 (2019)
FITTA is the main law that governs foreign direct investment (FDI) in Nepal. It sets the procedure for approval of foreign investment, the minimum investment threshold, and the list of sectors where foreign investment is restricted or conditional. Since stone, sand, and crusher operations involve extraction of natural resources, foreign investors should confirm the current sector classification with the Department of Industry before applying, since primary extraction activities can carry additional conditions.
Environment Protection Act 2076 and Environment Protection Rules 2077
Because crusher and quarry operations affect air quality, riverbeds, and nearby land, an environmental study is compulsory. Depending on the scale of the project, either an Initial Environmental Examination (IEE) or a full Environmental Impact Assessment (EIA) must be approved before operations start.
Foreign Investment Rules for the Stone, Sand, and Crusher Sector
Foreign investors are welcome in many parts of Nepal’s industrial sector, but certain conditions apply specifically to resource extraction industries.
Checking the Negative List Under FITTA
FITTA 2075 contains a negative list of businesses where foreign investment is either restricted or not permitted at all, such as personal service businesses, retail trade, and primary agriculture. Because stone, sand, and crusher operations involve direct extraction of natural resources, investors should verify the current status of this sector with the Department of Industry before submitting an application, since government policy on natural resource extraction can be updated through notices and amendments.
Minimum Investment Threshold
Under FITTA and its amendments, a foreign investor must generally bring in a minimum investment of Nepali Rupees twenty million (NPR 20,000,000) to qualify for foreign investment approval, except in sectors specifically exempted by law. This threshold applies to the total investment amount, not per shareholder, and must be verified at the time of application since thresholds can be revised through government notification.
Nepal Rastra Bank Approval and Foreign Currency Regulations
Once the Department of Industry approves the investment, the investor must report the transaction to Nepal Rastra Bank (NRB) and bring the approved capital into Nepal through the official banking channel. NRB brochures on foreign direct investment explain that funds must be transferred through a commercial bank, and the bank issues a certificate confirming receipt of foreign currency, which is required for later industry and company registration steps.
Step-by-Step Registration Process for a Stone, Sand, and Crusher Industry
Setting up this type of business requires several sequential approvals. The following steps summarise the general process for a foreign investor.
Step 1: Reserve the Company Name
Description: The first step is to apply for company name reservation through the online portal of the Office of the Company Registrar. The proposed name must not be identical or similar to an existing registered company.
Step 2: Obtain Foreign Investment Approval
Description: Before incorporating the company, a foreign investor must apply to the Department of Industry for foreign investment approval under FITTA, submitting the project proposal, investment plan, and passport or company registration documents of the foreign promoter.
Step 3: Register the Company at the Office of the Company Registrar
Description: Once approval is obtained, the company is incorporated under the Companies Act 2063 by submitting the Memorandum of Association, Articles of Association, and details of shareholders and directors to the Office of the Company Registrar.
Step 4: Register the Industry at the Department of Industry
Description: After company incorporation, the business must be registered as an industry with the Department of Industry, which issues an industry registration certificate confirming the nature and scale of the enterprise.
Step 5: Obtain a Mining or Quarry License
Description: For stone crushing and quarrying, an application must be filed with the Department of Mines and Geology for a mining license. For riverbed sand and boulder collection, approval from the concerned local government is also required.
Step 6: Complete the Environmental Assessment
Description: An Initial Environmental Examination or Environmental Impact Assessment report must be prepared by a registered consultant and approved by the concerned government body before extraction or crushing activities can legally start.
Step 7: Register for PAN, VAT, and Local Business Permit
Description: The company must obtain a Permanent Account Number (PAN) from the Inland Revenue Department, register for Value Added Tax if applicable, and obtain an operating permit from the concerned municipality or rural municipality.
The table below summarises the common documents required for these registration steps.
| Document | Purpose |
|---|---|
| Passport or company registration certificate of foreign promoter | Identity verification for FITTA approval |
| Project proposal and feasibility report | Required for foreign investment application |
| Memorandum and Articles of Association | Required for company incorporation |
| Bank capital inward certificate | Confirms foreign currency has entered Nepal |
| Environmental study report (IEE/EIA) | Required before extraction begins |
| Land ownership or lease document | Required for mining license application |
The table below gives a general overview of the responsible authority and approximate stage for each approval.
| Approval Stage | Responsible Authority | Governing Law |
|---|---|---|
| Foreign investment approval | Department of Industry | FITTA 2075 |
| Company incorporation | Office of the Company Registrar | Companies Act 2063 |
| Industry registration | Department of Industry | Industrial Enterprises Act 2076 |
| Mining licence | Department of Mines and Geology | Mines and Minerals Act 2042 |
| Environmental clearance | Ministry of Forests and Environment / Provincial Office | Environment Protection Act 2076 |
| Tax registration | Inland Revenue Department | Income Tax Act 2058 |
Tax and Compliance Obligations Under the Income Tax Act
Once the stone, sand, or crusher industry is registered, it becomes subject to ongoing tax and financial compliance under Nepali law.
Corporate Tax Rate for Mining and Industrial Businesses
Under the Income Tax Act 2058, industrial and mining businesses are generally taxed at the applicable corporate rate set out in the annual Finance Act. Certain industries established in specified areas or meeting government-defined conditions may qualify for tax concessions, so investors should check the current Finance Act provisions with the Inland Revenue Department before finalising their tax planning.
Value Added Tax and Royalty Payments
A crusher or aggregate business supplying goods above the VAT threshold must register for VAT with the Inland Revenue Department and issue VAT invoices for sales. In addition, mineral extraction businesses are required to pay royalty to the government as prescribed under the Mines and Minerals Act, calculated based on the volume or value of material extracted.
Repatriation of Profit and Dividend Under NRB Rules
Foreign investors who wish to send profits, dividends, or the sale proceeds of shares back to their home country must follow the repatriation procedure published by Nepal Rastra Bank. This generally requires submission of audited financial statements, tax clearance certificates, and NRB approval before funds can be transferred out of Nepal through a commercial bank.
Why Foreign Investors Choose CompanyNP for Registration Support
Setting up a stone, sand, or crusher industry in Nepal involves coordination between several government offices, including the Office of the Company Registrar, the Department of Industry, the Department of Mines and Geology, environmental authorities, and Nepal Rastra Bank. For a foreign investor unfamiliar with local procedures, this can be time-consuming.
Services We Provide
CompanyNP assists foreign investors with company name reservation, FITTA application, company incorporation, industry registration, coordination for mining and environmental approvals, PAN and VAT registration, and NRB reporting for inward investment. Our team prepares documentation according to the requirements of the Companies Act, FITTA, and Income Tax Act to reduce delays during the approval process.
Ongoing Compliance Support
Beyond initial registration, businesses in this sector must file periodic tax returns, renew industry and mining licenses, and maintain environmental compliance records. CompanyNP offers continued support for annual company filings with the Office of the Company Registrar and tax filings with the Inland Revenue Department, helping investors remain compliant with Nepali law throughout the life of their business.
Frequently Asked Questions
Is foreign investment allowed in the stone crusher industry in Nepal?
Foreign investment approval depends on current government policy under FITTA 2075, since resource extraction activities may carry conditions. Investors should confirm the sector’s status directly with the Department of Industry before applying for approval or registering the company.
Which government body issues the mining license for a crusher plant?
The Department of Mines and Geology issues mining and quarry licenses under the Mines and Minerals Act 2042. Riverbed sand and boulder collection, however, is generally managed by the concerned local government under the Local Government Operation Act 2074.
Is an environmental study compulsory for a crusher industry?
Yes, an Initial Environmental Examination or a full Environmental Impact Assessment is required before starting operations, depending on the project’s scale. This is mandatory under the Environment Protection Act 2076 and its accompanying rules.
What is the minimum investment amount for a foreign investor?
Under FITTA and its amendments, foreign investors are generally required to invest a minimum of NPR 20,000,000, subject to change by government notification. Investors should confirm the current threshold with the Department of Industry before applying.
Do stone and sand businesses need to pay royalty to the government?
Yes, mineral extraction businesses, including stone and sand operations, must pay royalty as prescribed under the Mines and Minerals Act 2042. The royalty amount depends on the type and quantity of material extracted from the licensed area.
Can profits from a Nepal-based crusher business be sent abroad?
Yes, profits and dividends can be repatriated after following Nepal Rastra Bank’s approval process, which requires audited financial statements and a tax clearance certificate. Transfers must be made through an authorised commercial bank under NRB foreign exchange regulations.