Introduction

When it comes to Effective Implementation of Act, Rules & regulations, Check and Balance becomes an important factor. Businesses my discard provisions either deliberately or un-deliberately for unfair advantages. To bring businesses under a common blanket of law and to ensure effective implementation, provisions for various degree punishments are drafted in the laws. In the context of VAT Act 2052, provisions for fines, interest and penalties are included under various Sections. We will be discussing the provisions of vat fine in nepal in depth and in details in this post. VAT fine in Nepal.and

Types of VAT fine in Nepal.

1. Fees for failure to pay VAT on Due Date. a
2. Interest for not abiding various provisions.d
3. Penalties for not abiding various provisions.

Penalties.

Tax Officer may penalize a taxpayer for the default using special power provided by Section 29.1 of VAT Act. Various cases for penalties and corresponding amount are stated below:

SN	Default	Penalty Amount ( Rs. )
1	Failure to register for VAT as per the order of Tax Officer pursuant to Sec. 5 Kha	10,000/- per Tax period.
2	Failure to register as per Compulsory VAT Registration Provision pursuant to Sec. 10.1 & 10.2	10,000/- per Tax period.
3	In case a person fails to Temporarily Register for VAT pursuant to Sec. 10 Ka or Kha	10,000/- per Tax period.
4	In case a taxpayer fails to display its Registration Certificate in conspicuous place pursuant to Sec. 10.5	10,000/- on every inspection.
5	In case a taxpayer does not use its Registration Number for export, import and other related documents pursuant to Sec. 10.6	10,000/- on every inspection.
6	In case a taxpayer fails to update the change in the particulars provided to IRD in the registration form pursuant to Sec. 10.7	10,000/- on every inspection.
7	In case a taxpayer fails to display Tax Plate in conspicuous place	2,000/- on every inspection
8	In case a taxpayer fails to issue Tax Invoice during Sales pursuant to Sec. 14.1	10,000/- on every default.
9	In case a taxpayer does not keep Tax Invoice while transporting goods worth Rs 10,00/- or more pursuant to Sec. 14.4	10,000/- on every default.
10	In case an Unregistered person collects VAT except those allowed by Act pursuant to Sec.tion 15	100% of VAT collected by unregistered person.
11	In case a taxpayer fails to keep up to date record of transactions pursuant to Sec. 16.1	10,000/- on every inspection.
12	In case taxpayer obstructs Tax Officer during observation of accounts and records pursuant to Sec. 16.1	20,000/- per obstruction
13	In case of records kept by taxpayer, the points stated in Sec. 16.2 are not recorded. VAT Fine in Nepal	Up-to 5,000/-
14	In case a taxpayer fails to keep records of accounts for 6 years	10,000/-
15	In case of unregistered person dealing with taxable goods fails to maintain some kinds of sales or purchase register. VAT Fine in Nepal	1,000/- on every inspection
16	In case of a developer creating billing software, fails to abide procedures prescribed by IRD pursuant to Sec. 14 Ka	5,00,000/-
17	In case a taxpayer obstructs to examine or assess the taxpayer	5,000/- on every obstruction.
18	In case a taxpayer issues Under-Invoicing. Under- Invoicing means deliberately reducing the the Sales Price of item in the bill below its Real Sales Price.	Higher of: 2000 per invoice or 100% of Tax evaded through under invoicing
19	In case of violation of any other provisions in this Act	1,000/- on every violation.

Table of VAT fine in Nepal.

NOTE:- The penalty of Rs 10,000/- for late verification of Purchase Book & Sales Book has been removed from the Act with Amendments by Finance Budget of 2078/79.

What is the due date of payment of VAT in Nepal?

The due date of Payment of VAT is within 25 days after the end of VAT period. VAT period can be monthly, quarterly and tri monthly. Normally, for most business VAT period is monthly.

What is the fine for not submitting VAT Return?

The fine for not submitting VAT return within 25 days of end of VAT period is higher of Rs 1,000/- or 0.05% per day of applicable VAT.

What is the fine for issuing fake Sales Invoice?

In case a fake Sales Invoice is issued by a taxpayer, penalty of 50% of Invoice value or 6 months of imprisonment or both is levied.

Fines during Stock Investigation by IRD

Physical Stock is Less than the Stock shown in the Stock Register.

In case it is found that the physical stock is less than the stock shown in Stock Register during IRD Investigation, the default is treated as Sales without issuing Invoice. In this case following penalty is levied.

• Penalty as per SN 8 of above table for not issuing VAT Invoice.
• VAT on the Residual value of Item.
• 100% penalty on the Residual VAT.

Example

During IRD Investigation it was found that there was less stock of 10 TVs in the warehouse than the Stock Register of a firm. The Sales price of TV was Rs 1 lakhs. In this case the total fine is calculated as:- Rs 10,000 (SN 8 of table above) + VAT of Residual value = 0.13*10*100000= Rs 1,30,000 + 100% of Residual VAT = Rs 1,30,000. Total = Rs 2,70,000.

Physical Stock is More than the Stock shown in the Stock Register.

In case it is found that the physical stock is more than the stock shown in Stock Register during IRD Investigation, following treatment is applied by Tax Officer.

• Treat the Excess Stock to be Sold at Market Value and book it as Income.
• Levy penalty of 50% of Market Value of Excess Stock.

Example

During IRD Investigation it was found that there was more stock of 10 TVs in the warehouse than the Stock Register of a firm. The Sales price of TV was Rs 1 lakhs. In this case the total penalty is calculated as 100000*10*50% = Rs 5,00,000.

Interest and Fees on Unpaid VAT

Interest @ 15% per annum is levied for VAT unpaid where part of month is taken as a full month. Additionally, Fee of 10% per annum on unpaid VAT can also be levied by Tax Officer.

Comment from the Author :

As there are multiple penalties for not abiding various provisions of the Act, it is always advised to abide the provisions to minimize further financial and reputational loss. It is also advised to not evade laws in the name of gaining some minimal advantage as these evasions if assessed by Tax Authority will lead to maximum charges, fees, fines and penalties wherever possible. VAT Fine in Nepal

Disclaimer:

The information provided in this blog is for informative and academic purposes only. The Author bears no liability for any kinds of loss caused due to the decision taken on the basis of this blog. Information in this blog should not form a substitute to professional advice. Always seek professional advice or Contact us before taking any Financial Decision.

Click here to study about the tax deductions available to Natural person in Nepal.

Click here for Latest Tax Rate in Nepal for 2078/79.

Link to Department of Cooperative Official Website