Cottage & Small Industry Registration (DCSI): Steps + 50% Tax Concession

Many entrepreneurs confuse two separate registrations. The Office of the Company Registrar (OCR), under the Companies Act 2063 (2006), registers the legal company (a private limited, public limited or non-profit) and gives it a distinct corporate identity. The Department of Cottage and Small Industries (DCSI), by contrast, registers the industry (udhyog) itself under the Industrial Enterprises Act 2076 (2020) and issues an industry registration certificate that establishes the enterprise's category, product line and eligibility for industrial concessions.

You do not always need both. A sole proprietorship cottage or small industry can be registered directly with DCSI without going to the OCR at all, because a proprietorship is not a company. If you want a company structure (limited liability, multiple shareholders), you first incorporate at the OCR and then register that company's industrial activity with DCSI as a cottage or small industry. In either case, the industry registration is what unlocks the tax and customs concessions discussed below.

Jurisdiction is decided by size. Cottage and small industries (fixed capital up to NPR 150 million) are registered with DCSI and its network of provincial and district Cottage and Small Industry Offices. Medium and large industries (fixed capital above NPR 150 million) are registered with the Department of Industry (DoI) in Kathmandu. Getting this right at the outset avoids filing at the wrong office and having to start over.

Section 17 of the Industrial Enterprises Act 2076 classifies industries by size using fixed capital and other criteria. A micro-enterprise has fixed capital not exceeding NPR 2 million (excluding house and land), is run by the entrepreneur, employs at most nine people including the owner, has annual transactions under NPR 10 million, and uses electricity, fuel or oil-engine power of 20 KW or less.

A cottage industry is defined mainly by its nature rather than a capital ceiling: it is based on traditional skills, arts, culture, local raw materials and local technology, is labour-oriented, and uses installed electric energy of up to 50 KW. Schedule 2 of the Act lists specific trades treated as cottage industries, such as handloom, pottery, wood carving, handmade paper, and similar craft-based activities.

A small industry is any industry with fixed capital not exceeding NPR 150 million, other than a micro-enterprise or cottage industry. Above that, a medium industry has fixed capital over NPR 150 million up to NPR 500 million, and a large industry exceeds NPR 500 million. Because DCSI handles the cottage and small tiers, most home-based, craft and small manufacturing or service ventures fall squarely within its remit.

Requirements vary a little by industry type and by whether the applicant is an individual or a company, but the core document set is consistent across DCSI offices. Have clean photocopies plus originals for verification, and be ready for the office to ask for extra papers for regulated products (for example food, cosmetics, or anything with an environmental footprint).

For industries with a potential environmental impact, an Initial Environmental Examination (IEE) or Environmental Impact Assessment (EIA) report may be required; most simple cottage industries do not trigger this. A recommendation or No-Objection letter from the local ward or municipality is commonly requested to confirm the business location is permitted at that site.

The process is broadly the same whether you walk into an office or use the government's online industry registration system. You submit an application with the documents above, an officer reviews it for completeness and legality, some industries undergo a site inspection, and on approval the office issues the industry registration certificate. Straightforward cottage industries are often completed within a few weeks; anything needing technical assessment takes longer.

Offline, you visit the Cottage and Small Industry Office for your district or the relevant provincial office, collect and fill the application, attach documents, pay the fee, and collect the certificate once approved. Online, applicants can initiate registration through the Ministry's Online Industry Registration System (OIRS) portal, upload documents and pay fees electronically, then complete any verification in person as directed. Availability of full online processing can vary by office and industry type, so confirm with your local office before relying on it end to end.

After you receive the industry certificate, complete the usual downstream steps to actually trade: obtain a Permanent Account Number (PAN) from the Inland Revenue Department (and register for VAT if your turnover or product line requires it), and open a business bank account. These are separate from DCSI registration but are what let the enterprise invoice, pay tax and claim the concessions.

Registration fees are modest and scale with industry size. Indicative fees reported in recent years are roughly NPR 1,000 for micro-enterprises, around NPR 2,500 for cottage industries, and about NPR 5,000-15,000 for small industries depending on fixed capital. Treat these as indicative: the exact amount is set by prevailing rules and can be revised in the annual Finance Act, so confirm the current schedule at the office or on the portal.

Processing time typically ranges from about a week to a month for standard cases, and longer where technical review, environmental study or extra approvals are involved. Incomplete documents are the most common cause of delay, so cross-check the checklist before you file.

Renewal is a recurring obligation. Industry registrations are renewed periodically and it is essential to renew on time to keep the certificate valid and preserve access to concessions and government support programmes. Confirm your enterprise's specific renewal cycle and fee with your DCSI office, since requirements differ by category and are updated by rule; late renewal can attract fines or lapse of registration.

The headline benefit is the income-tax concession under Section 24(6) of the Industrial Enterprises Act 2076. A cottage industry and a small industry that were in operation (upon registration) at the commencement of the Act, and those that come into operation upon registration under the Act, with fixed capital of less than NPR 10 million, are entitled to a 50% exemption on the income tax leviable on them. Note the key threshold: this specific 50% concession is tied to fixed capital below NPR 10 million.

There are also customs facilities. The Act provides that customs-duty concessions may be granted to micro, cottage and small industries when importing new technology, machinery, tools and equipment needed to enhance their capacity, with the rate and mechanism set by the Ministry of Finance and notified in the Nepal Gazette. Beyond the Act, additional VAT, customs and excise treatment for particular goods is governed by the annual Finance Act and Inland Revenue rules, so the precise reliefs available in a given fiscal year should be checked against current tax law.

Non-tax benefits matter too. A DCSI-registered industry gains formal legal recognition, which is what banks and cooperatives look for when extending business loans, and it can access DCSI training, skill development, exhibitions and market-promotion programmes. Industries registered wholly under the ownership of women entrepreneurs are entitled to a 35% exemption on the industry registration fee and a 20% concession on registering industrial property, under the Act's provisions for female entrepreneurs.

The Department of Cottage and Small Industries (Gharelu Tatha Sana Udhyog Bibhag) operates under the Ministry of Industry, Commerce and Supplies. Its lineage goes back to the Cottage Skill Awareness Office (Gharelu Ilam Prachar Adda) established in 1996 BS (1940 AD); the department in its modern form was set up in the 1970s to promote, develop and register cottage and small industries across the country.

DCSI works through a network of provincial and district-level Cottage and Small Industry Offices, which is where the great majority of gharelu tatha sana udhyog registrations are actually filed. Alongside registration, the department and its offices deliver entrepreneurship and skill training, technical guidance, and market-promotion support aimed especially at rural and semi-urban enterprises.

Because rules, fees and online-portal features change over time, always cross-check the current requirement with your local office or the official DCSI website before filing. This guide summarises the durable structure and the statutory concessions; the exact fee schedule and renewal cycle in force for your fiscal year are best confirmed at source.