VAT Exempt
Also called: Schedule 1
Supplies outside VAT entirely, such as basic food, health and education. No VAT is charged and none reclaimed.
In detail
Exempt supplies are listed in Schedule 1 of the VAT Act: basic agricultural produce, health services, education, books, public transport, financial services and more. No VAT is charged on them, and the business cannot reclaim the input VAT on costs used to make them, so that VAT becomes part of the expense. A business selling only exempt goods does not register for VAT; a mixed business apportions its input VAT between taxable and exempt sales. BRAccount provides the template VAT Exempt (Schedule 1) - YFF and the categories Nepal VAT Exempt Sales and Nepal VAT Exempt Purchase; exempt sales appear in the Sales Book in the exempt column and stay out of the taxable total on the VAT Return.
Formula
VAT charged = Rs 0; input VAT on related purchases is not recoverable and stays in the expense.
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Debtors | Rs 15,000 | |
| Rendering of Services | Rs 15,000 |
How to record it in BRAccount
- 01Go to Selling > Customer and set Tax Category to Nepal VAT Exempt Sales for buyers of exempt supplies.
- 02Or pick VAT Exempt (Schedule 1) - YFF in the template field on the invoice.
- 03Go to Invoicing > Sales Invoice > New and enter the exempt service, for example tuition of Rs 15,000.
- 04Submit. The entry above posts with no VAT row.
- 05Open Nepal IRD > Sales Book; the sale shows in the exempt column and not in the taxable total.
When to use it
Use the VAT Exempt template; such sales stay out of the VAT return's taxable column.
Example from the demo books
Tuition fees billed by a school are exempt.