VALUE ADDED TAX (VAT) rates, rules and updates of Nepal for F/Y 2073-74
A Brief overview of VAT in Nepal
Value Added Tax (VAT) is an indirect tax levied on the value creation or addition. Concept of VAT in Nepal was introduced in FY 2049/50 but the act was developed in BS 2050. VAT was implemented in 1998 and is the major source of government’s revenue. It is administered by Inland Revenue Department of Nepal.
VAT Rates in Nepal
There are two rates of VAT: Normal VAT rate is 13%, some goods or services are subject to VAT at 0%. In addition some goods or services are exempt from VAT.
Now lets look into the important changes of rates, rules and updates of VAT in Nepal for F/Y 2073-74. Here are the important highlights:
– No changes in the existing rate of 13 percent for the fiscal year 2072/73.
– As per the Budget Speech threshold limit of Rs 20 lakhs has been increased to Rs 50 lakhs for the registration.
– As per the Budget Speech threshold limit of Rs 10 lakhs has been increased to Rs 20 lakhs for the registration purpose for business involving services however, the same is to be incorporated while updating VAT Regulation. (New)
– New provision has been added in the Section 11 (sub sec (1)) of Vat Act 2052 for cancelation of registration which includes: “any person registered under Vat not having turnover of 50 Lakhs in respect of goods and 20 Lakhs in respect of business involving both goods and services or services for last 12 months. (New)
Provided that the person desirous of registering voluntarily as per Sec. 9 of the Act may continue to be a registered person by making an application as prescribed within Ashad End 2073.
– The threshold of bank guarantee provision has been reduced to 40% of the export sales from 60% of the export sales made in last 12 months to import raw materials attributable to production of goods to be exported equivalent to the VAT applicable on such import.
– New additional condition u/s 4 (4) of Income Tax Act has been inserted for voluntarily registration of the person limiting registration only to those person who doesn’t opt for presumptive taxation.
– New section 10 kha has been inserted for temporary registration of two or more persons working together in joint venture for specific period and prescribed work which shall be cancelled after the expiry of the term prescribed.
– If during stock verification of the taxpayer excess stock item which has not been mentioned in stock register is found the tax officer has authority to charge 50% of market price of such excess stock as penalty.
– For green house and irrigation equipment imported by agricultural and horticulture firms are to be exempt from value added tax.
– The liability to inform the tax officer in case of transfer of business resulting due to death or sales has been divided among the registered person(transferor) and the transferee which previously was liability of registered person(transferor) alone.
– Any person either registered or not, receiving services from any person residing outside Nepal, should assess and collect the Vat amount at the time of payment, applicable as per the provision of Vat Act 2052 and Vat rules. (New)
– Schedule 1 on Vat Act has been updated to include :
Equipment mentioned in Heading 87.14, spare parts and accessories, required for manufacturing of electric rickshaws imported by entities established with purpose of manufacturing electric rickshaws.
Lithium Batteries less 12 volt and 10 amp power used in solar powers on recommendation of Alternative Energy Promotion Centre.
– Schedule 2 of Vat Act has been updated to include: Deep Cycle Lead Acid Batteries (Sub Head-8507.20.00) used in Clean Tempo on recommendation of Ministry of Environment. (New)
– New Subsection Gha has been added on section 25: “Notwithstanding anything mentioned elsewhere in act, any amount to be refunded under the provision of act, if application for such refund is not provided within 3 years of due period shall not be refunded.” (New)
– Section 19 subsection 7 has been modified to include electric payment for deposition of VAT liability and date of payment shall be the date on which approval for payment has been submitted. (New)
– In case of sale of Mustard Oil, Banaspati Ghee and any refined edible oils produced by national industries to registered entities, 40 % rebate is granted on Vat amount charged by them on such sale. Such amount shall be refunded as per the prescribed procedure. In case of sale of such oil and ghee on bulk to any other person rebate shall not be provided. Similarly rebate shall not be provided to entities importing refined oil and selling to any industries in bulk and industries selling by refilling such oils. (New)
Information source for VAT in Nepal and rates/rules: Official website of IRD, Wikipedia, Income tax manual of Nepal