VAT registration in Nepal. Who has to register for VAT? Answered.

Background.

This blog contains a detailed explanation of Provision of VAT registration in Nepal, criteria for registration, registration not required, its benefits and more in depth and in details.

Introduction to VAT registration in Nepal

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:

  1. Compulsory Registration in VAT.
  2. Voluntary Registration.
  3. Temporary Registration.
Diagram of methods of VAT Registration in Nepal.

Compulsory VAT registration in Nepal regardless of turnover.

Any businesses that fulfills the criteria prescribed in the [su_tooltip title=”” text=”These provisions have been removed From VAT Act by the Finance Ordinance 78.79. The provision of Compulsory VAT registration based on types of business and area of registration has now been removed from the Act. Now business has to register for VAT if they reach Registration Threshold.” position=”top” background=”#314086″ color=”white” font_size=”11″ text_align=”left” max_width=”300″ radius=”5″ shadow=”no” behavior=”hover” class=””]Section 10.2A and 10.2B[/su_tooltip] should compulsorily get registered for VAT no matter what their transactions amounts are.

 Operating listed business within the state of Nepal. VAT registration in Nepal

If a person conducts business listed below within the state of Nepal, VAT registration should be made in the initial phase of establishment of business compulsorily. VAT registration in Nepal

NOTE:- Provision of Compulsory Registration for VAT regardless of turnover has been removed from VAT Act by Finance Ordinance 78.79. Now, businesses have to register for VAT when they reach Registration Threshold.

Tourism BusinessManufacturing/ Mining  Industry & trading BusinessEntertainment/ Luxury BusinessOther Businesses of :-
TrekkingBrick productionDiscoMotor Parts
ParaglidingCrusherHealth ClubElectronic Software
RaftingSand MiningMassage TherapyToy Business
Ultra-Light FlightSlate production Customs Agent
Tourist VehicleStone Production  
 Alcohol & Wine  
Group-wise details for compulsory VAT registration.

NOTE:- Provision of Compulsory Registration for VAT regardless of turnover has been removed from VAT Act by Finance Ordinance 78.79. Now, businesses have to register for VAT when they reach Registration Threshold.

Operating listed business in Metro, Sub- metro & Municipality or areas prescribed by IRD

If a person conducts business listed below in Metropolitan City, Sub- Metropolitan City, Municipality or areas prescribed by IRD, VAT registration should be made in the initial phase of establishment of business compulsorily

House SolutionsServices & ConsultancyFood/Celebration Service.Others
HardwareAccounting ServicesCatering ServiceIce- cream industry
FurnitureAuditing ServicesParty palaceBoutique industry
Fixture & furnishingEducational ConsultancyParking palaceEntity supplying uniform for health, educational & others.
SanitaryParking ServiceRestaurant with bar 
MarbleDry cleaners using machinery  
ElectronicsBoutique  
 Color lab  
Group-wise details for compulsory VAT registration.

NOTE:- Provision of Compulsory Registration for VAT regardless of turnover has been removed from VAT Act by Finance Ordinance 78.79. Now, businesses have to register for VAT when they reach Registration Threshold.

NOTE: A person shall also be compulsorily registered if during the time of inspection by tax officer the stock of the business exceeds the limit prescribed by IRD.

Registration due to excess of Turnover than prescribed Threshold.

If the turnover ( Sales or Purchases) of a business exceeds the limits stated below, the business has to be registered for VAT purposes. Total Sales or Purchases of 365 days is taken as a basis for determination of threshold limit stated below. VAT registration in Nepal

  1. For a business dealing only on goods, the turnover limit is Rs. 50 lakhs.
  2. For a business dealing only on services, the turnover limit is Rs. 20 lakhs.
  3. For a business dealing on both goods as well as services, the turnover limit is Rs. 20 lakhs.

Who is not required for VAT registration.

VAT registration is not required for a person dealing only on the goods or services listed in Schedule 1 of the VAT Act 2052. Goods and services listed in the Schedule 1 of the VAT act are also called ” Exempted Items”. There are 1000s of Items listed in the Schedule which can not be listed here.

Some of the items stated in the Schedule 1 of VAT Act are as Follows:

  • Basic Agricultural Items.
  • Transaction of Gold and similar Jwelleries.
  • Transaction of Medical Supplies.
  • Medical Services( subject to health Service Tax @ 5%) VAT registration in Nepal

Want .Pdf file of ” Exempted Items”?, Click this google drive link>> https://drive.google.com/file/d/1uRvVibEbo-vsFSp7-fpjlaqsOUV5ZPkE/view?usp=sharing.

VAT Registration Example

Example 1 VAT Registration

Mister Ramesh Baral is an owner of ” Pure Gold Store”. The business designs, crafts and sells Gold Jewelries. The total transaction of Pure Gold Store in the Fiscal Year 2078.2079 was Rs 5 Crores. Though the transaction is very high in comparison to the registration limit of Rs 50 lakhs, the store is not required to Register for VAT as Gold is a VAT exempt item.

Example 2 VAT Registration.

Raju has 2 proprietorship Business namely “Raju Grocery Store” & ” Raju Hardware”. The total Transaction of Raju Grocery Store in Fiscal Year 2078.2079 was Rs 30 lakhs & in case of ” Raju Hardware”, it was Rs 45 lakhs. Though there are 2 different businesses of Mister Raju, these business will be Registered under same PAN in the IRD and in terms of VAT, both businesses are treated as conducted from a single business. Thus Both of the business has to be registered for VAT as total Transactions exceeds Rs 50 lakhs.

Voluntary Registration.

If a business not meeting above Compulsory Registration criteria wants to get VAT registered for certain benefits like: participate in auction, supply goods to Nepal Govt. Office, get VAT credits for expensive machinery purchases, then can registered voluntarily for VAT. VAT registration in Nepal

We will discuss about Temporary Registration & Process for VAT registration in the later posts in detail.

Types of TAX/ VAT/ PAN Plates in Nepal

Colour of Tax/PAN/VAT plates

Tax Plate for business which deals only with VAT Exempt Items stated in the Schedule 1 of the Act is a White Background Plate with Red Letters.

Tax Plate for business which is Registered for VAT is a Green Background Plate with White Letters.

Tax Plate for a business that deals with taxable supply but not registered due to threshold Limit is a Yellow Background PAN plate with Black Letters.

Comment from Author regarding VAT registration in Nepal

It is always advised to register for VAT if a business meets the criteria of Registration without hesitation. VAT registered entities are generally trusted more by general public and can take part in large tender, can supply goods and services to public enterprises as such enterprises are directed to purchase exclusively from VAT registered entities. And most importantly can claim VAT on the purchases made. Similarly, business accounts will be properly maintained which promotes efficient planning and operation of business.

Conclusion:

VAT registration thus can be made Compulsorily or Temporarily only when there is transaction of goods and/or services other than that of Exempted Items. Anyone registered for VAT has to follow certain compliance associated with it in proper manner to avoid unnecessary fines & penalties.

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