In this blog, we will be discussing about the provision of Temporary registration for VAT in Nepal, criteria for registration, procedures and compliances and deregistration procedures.
Provision for VAT Registration is stated in Section 10 of VAT Act. As per VAT Act 2052, a taxpayer shall be registered for VAT as per following methods:
- Temporary Registration.
- Voluntary Registration.
- Compulsory Registration in VAT
We have already covered about Compulsory Registration and Voluntary Registration in the previous post. In this post, we will be discussing about the provisions of Temporary VAT Registration in Nepal in depth and in details.
Temporary Registration in VAT
Background & Introduction
Temporary Registration is also called ” Exhibition Registration“. In case an unregistered person supplies goods or services at exhibition, show, fair, demonstration, display or similar event, the price provided by unregistered person may be lower than that of Registered person. So if unregistered businesses are freely allowed to take part in such programs, law abiding honest taxpayer will be victimized and demotivated. In order to address this situation and maintain horizontal principle of equity, lawmakers framed the provision of Temporary Registration for VAT. Section 10A of VAT Act 2052 has stated the provisions of Temporary Registration which is discussed below.
Who has to register for Temporary Registration for VAT in Nepal?
Any Unregistered person interested to participate in any kinds of fair, display, exhibition, demonstration, display or other similar events and also the organizer of such event has to be registered for Temporary Registration.
What is the procedure for Temporary Registration?
Procedure for Temporary Registration is guided by Rule 7 Ka of VAT Rules and Regulations.In order to Temporarily register for VAT, application for registration along with the recommendation from the Organizer has to be submitted to Inland Revenue Department Office. During this procedure, taxpayer has to deposit 2% of the Estimated Revenue generated from the fair as Retention. When all the documents and retention money is deposited, Tax Officer will issue a Temporary Registration Certificate.
Compliance after Temporary VAT Registration
The Guided approach as per Rule 7 Ka regarding Compliance after Temporary VAT Registration are:
- Taxpayer Registered for VAT Temporarily has to file an application for Deregistration within 7 days of the end of such event. The application should include Original PAN Certificate, Tax Clearance Certificate and Recommendation letter of organizer after filing returns and paying them.
- The 2% of Retention money can be used to set off against VAT payables collected during temporary registration.
- After inspection of VAT returns, Payments and submitted Documents, Tax Officer will deregister Registration within 15 days of application of Registration.
NOTE ( Rule 7ka.7 ): During Inspection, if Tax Officer assesses additional liability, 3 days time period will be provided to make the payment. In case the person fails to make the above payment within the deadline, additional VAT will be recovered from the 2% retention deposited by Taxpayer. If the Retention is not enough for settling additional liability, the remaining VAT amount will be collected from the organizer.
Conclusion & Comment from Author:
Temporary Registration is an important provision framed to protect law abiding genuine taxpayers and to treat all with equal law. Also it is an important concept to get used to.
Bare law Section 7A of VAT Rules and Regulations. Legal Words !!
For those who wants to Read the Real Bare wordings.
7(a) Special Provision related to Temporary Registration:
(1) Any unregistered person, willing to engaged in any Taxable transactions of goods or
services at fair, exhibition and similar activities as organizer or participant shall have to be
temporarily registered under VAT before starting such transaction as per 10(a).
(2) Any person whose income is presume on such program, is required to deposit 2% of such
presume income to IRD under sub-rule(1).
(3) Any application received by IRD or Tax service Department, then the Tax officer should
give the certificate of VAT registration including Registration Number under sub-rule (1).
(4) The person has to submit the return of the transaction ant shall have to pay the tax there on
within 7 days from the completion of fair or exhibition further after completion of such
event, the person has to cancelled such temporary registration within 7 days under sub-rule
(5) Any application received by IRD regarding cancellation of Registration, then the Tax
officer on inspection of his/her Tax return details and inform the applicant of such
cancellation within 15 days under sub-rule(4).
(6) Deposit as prescribed under sub-rule (2) is adjusted under sub-rule (4).
(7) On inspection as prescribed under sub-rule (5), if additional tax amount is reported, then
the tax officer shall order an applicant to file within 3 days of such order. However if he is
unable to file within 3 days, then it shall be deducted from his deposit ,as well as if it is
unable to fulfill from such deposit, then the remaining amount shall be claimed from