VAT in Nepal: rates, registration, invoices, returns and penalties (2083/84)

VAT rates in Nepal

Section 7 of the VAT Act sets one standard rate, 13%. The Finance Act 2083 let the Government notify lower rates by Gazette notice (s7(1a)) and set 5% for two supplies (s7(1b)), from Shrawan 1, 2083 (17 July 2026).

A consumer who pays electronically is relieved of a tenth of the VAT on the bill itself (s25(1b), changed by the Finance Act 2083 from a refund to an exemption on the bill). At 13%, the consumer pays an effective 11.7%.

What is exempt and what is zero-rated

The Finance Act 2083 replaced Schedule 1, the exempt list, in full. A good is exempt only when both its 8-digit HS code and its description match the schedule; an "other" sub-heading with no goods named is exempt by its code (Schedule 1, note 1). The main groups:

• Basic farm produce: unprocessed grains, fresh vegetables and fruit, live animals, fresh meat, fish and eggs, plain milk, paneer and chhurpi, unprocessed tobacco sold by farmers, salt, and drinking water supplied by tap or tanker.
• Farm inputs: fertiliser, seeds, feed, and listed agricultural machinery such as power tillers.
• Health: medicines, medical oxygen, diagnostic reagents, hearing aids, wheelchairs, stents and other listed medical goods; health services.
• Education and culture: school and university education with an institution's own canteen, hostel and transport; books, newspapers and printed music; library, museum, gallery and zoo entry.
• Financial services and the listed insurance classes (life, accident, health, crop, livestock, micro-insurance, reinsurance), money transfer, exchange, securities and commodity markets; insurance agents' services.
• Gold and silver (unwrought, semi-manufactured and as jewellery) and their making charges; diamonds and precious stones are taxable.
• Land and buildings bought, sold or rented, except hotel, guest-house and apartment-style accommodation; betting, casinos and lotteries.
• Public passenger transport, except air, cable car and ride-sharing platforms; export cargo; government postal service and the services of the federal, provincial and local governments.
• Ambulances, hearses, fire engines and electric tempo chassis; solar panels, wind generators and lithium-ion batteries.

Hotels, restaurants, bars, guest houses and cafeterias charge VAT on the fresh produce, meat, fish, milk and eggs they serve, though the same goods are exempt elsewhere (Schedule 1, Groups 1 and 3).

Zero-rated supplies (Schedule 2) carry 0% VAT and keep their input credit: exports proved by customs documents, stores sold on international flights, services to non-residents, supplies to diplomatic missions on the Foreign Ministry's recommendation, goods sold to Special Economic Zone industries, and listed supplies by Nepali manufacturers to hydro, solar and wind projects.

VAT registration: who must register and when

Threshold for goods, vehicle hire and transport

Rs 50 lakh (Rs 5,000,000) in twelve monthsVAT Rules r6, r7

Threshold for services, or goods and services together

Rs 30 lakh (Rs 3,000,000) in twelve monthsVAT Rules r6, r7

How turnover is measured

The higher of the past twelve months' purchases or salesVAT Rules r8

When to apply

Within 30 days of passing the threshold, or as soon as the year's turnover is expected to pass itVAT Rules r7(1)-(2)

Below the threshold

Registration is voluntary; an unregistered business displays a notice that it need not register, and must not show or collect VAT (fine: all of the VAT collected)r6, Act s15, s29(1)(d)

Contracts and consultancy

A registered person gives contracts or consultancy worth more than Rs 5 lakh a year only to registered personsVAT Rules r6क(2)

Construction

Commercial buildings costing more than Rs 50 lakh are built only by registered personsVAT Rules r6ख

Changes

Any change in the registration details is reported within 15 days (Rs 10,000 each time)Act s10(7), s29(1)(b2)

De-registration

When twelve months' turnover falls below the threshold; the closing return (Annex 11) within 30 days, with VAT on stock and capital goods already creditedAct s11, Rules r12

Trading without registering when registration is due costs Rs 20,000 each time (s29(1)(a)). The registration certificate is displayed at every place of business, and branches and warehouses are certified with the tax office before trading from them (Rs 10,000 each time, Finance Act 2082).

The tax invoice (कर बीजक) and other VAT documents

Every registered person issues a tax invoice for every supply (s14). Missing one costs Rs 10,000 each time, and a buyer who does not take one Rs 1,000 (s29(1)(c)). Annex 5 of the VAT Rules sets the full tax invoice; it shows:

• "कर बीजक" (tax invoice) printed clearly on its face (r17(2)).
• The invoice number, the transaction date and the issue date.
• The seller's name, address and PAN; the buyer's name, address and PAN.
• The payment method: cash, cheque, credit or other.
• For each line: serial number, HS code (at least the first four digits, from the customs declaration for imported goods), a description naming the kind, size, model and brand, quantity, unit price and amount (r17(1)).
• The discount and its percentage, the taxable value, the VAT rate and amount, and the total; the seller's signature.
• For a sale in foreign currency, the rupee amount at Nepal Rastra Bank's rate on the day (r21).

Three copies are made: the original for the buyer, a second kept for the tax office and a third for the seller's own records (r17). The full rules for billing software, CBMS and QR codes are in the IRD billing software guide.

Abbreviated tax invoice (संक्षिप्त कर बीजक)

Retail sales only, with the tax officer's leave; every item named; never above Rs 10,000 taxable value; a full invoice whenever the buyer asks; the buyer gets no input credit on itr18, Annex 6

VAT inside a VAT-inclusive price

Price × 13 ÷ 113 at 13% (price × rate ÷ (100 + rate))r18(7)

Credit and debit notes

Headed क्रेडिट नोट or डेबिट नोट, with serial number, date, both parties' names, addresses and registration numbers, the original invoice's number and date, the description and reason, the amount and the tax; a monthly account of notes is keptr20

Goods on the move

Goods worth more than Rs 10,000 moved outside the area IRD designates travel with their tax invoice (Rs 10,000 each time); breaking IRD's directive on moving goods costs Rs 50,000 each times14(4), s29(1)(c1), s29(1)(m)

Electronic invoices

IRD sets the standards; taxpayers it names by notice must invoice electronically and connect to CBMS, or use IRD's own billing systems14A (Finance Act 2083)

Software that can edit data

Rs 5,00,000 for an e-invoicing taxpayer whose software lets invoice data be deleted or corrected; Rs 1,00,000 for other breaches of s14As29(1)(g2) (Finance Act 2083)

Price display

Price tags, menus and shelf prices show VAT-inclusive pricesr14ख

When VAT falls due and on what value

VAT falls due at the earliest of four events: the invoice is issued, the goods are taken, the service is done, or the money is received (s6(2)). An advance from a customer is therefore taxed when it arrives. Telecom and other continuing public services are taxed on the invoice date, and an instalment contract on the earlier of the payment or its due date (s6(3)).

The taxable value is the price plus the transport and other costs the supplier bears, the excise duty, royalties and other duties and fees, without the VAT itself. A trade discount given on the price is left out. A barter, a part payment or a price far below the market is valued at market value, and a security deposit is not taxed until it is applied to the price (s12).

Input tax credit: what can be claimed

A registered person credits the VAT paid on purchases and imports used in its taxable business against the VAT it charges (s17). The VAT Rules add the conditions:

• A full tax invoice for a local purchase; for an import, the customs declaration, the receipt and the invoice (r39(1)).
• Each invoice is credited once, and only when it is dated within one year of the claim (r39(2)).
• No credit on drinks, liquor and beer, petrol for vehicles or entertainment (diesel and LPG are no longer blocked); passenger vehicles of three or more wheels are credited at 40%; unless supplying those items is the main business (r41).
• Inputs used for both taxable and exempt sales: the credit is the share of taxable sales in all sales, unless the input relates directly to one or the other (r40(3)-(5)).
• No credit on an abbreviated invoice (r18(3)), on used goods bought from unregistered persons, or on goods taken for personal use (r44).
• Goods lost to fire, theft, accident or breakage: claim within 30 days. Goods that expired in Shrawan to Ashwin are claimed by 25 Kartik, Kartik to Poush by 25 Magh, Magh to Chaitra by 25 Baisakh, and Baisakh to Asar by 25 Shrawan (r39क).
• On registration, VAT on stock bought in the past year is claimed within 15 days on Annex 16 (r43).
• Credited goods that leave taxable use, or stock that cannot be found, are taxed at market value (s17(4), r40).

Reverse charge: VAT on imported services

When a business buys a service from abroad (software subscriptions, online advertising, cloud hosting, consultancy), the supplier charges no Nepali VAT, so the buyer charges itself 13% on the price at the earlier of paying and receiving the service, and pays it (s8(2)). The same applies to vehicle hire and transport bought from a person not registered for VAT (s8(2a), Finance Act 2080). A registered buyer then credits that VAT like any other input (s17(5b)), so for a fully taxable business the two cancel.

A foreign digital company's own Digital Service Tax (2% under the Finance Act 2083 s23) is separate: it is paid by the foreign provider on sales to consumers in Nepal above Rs 30 lakh a year, and not on sales to businesses for business use.

The VAT return and when to pay

Return period

Each Bikram Sambat month; four-monthly by IRD's leave for print and electronic media and for turnover up to Rs 1 crore a yearAct s18(1), Rules r26

Due date

Within 25 days of the end of the period, nil returns includeds18(1), s19(1)

Districts without an Inland Revenue Office

By the 15th, at the local level or the treasury offices18(1a)

Amending a return

A return filed on time may be amended within 7 days of filings18(4) (Finance Act 2083)

Paying

Tax above Rs 10 lakh is paid by cheque, draft or electronic transfer; an electronic payment counts on the order dates19(7), (7a)

Format

Annex 10 of the Rules, in whole rupeesr26(1)

Annex 10 has three columns, transaction value, credit and debit, and these boxes: 1.1 taxable sales, 1.2 exports, 1.3 exempt sales; 2.1 taxable purchases, 2.2 taxable imports, 2.3 exempt purchases, 2.4 exempt imports; 3.1 other adjustments (where the reverse-charge VAT and a tax officer's advices go); 4 total; 5 debit less credit; 6 credit carried from the last return; 7 tax payable (5 less 6); 8 refund claimed and 9 its basis; 10 the payment and its voucher; and 11 the number of purchase invoices, credit notes, debit notes, credit advices, debit advices and sales invoices used in the period.

For 2083/84 the monthly dates are in the Nepal tax calendar: Kartik 2083's return is due by 25 Mangsir 2083 (11 December 2026).

Excess credit and VAT refunds

• Excess credit first settles other VAT dues and is then carried forward month to month (s24(1)).
• A refund may be claimed after four months running of carried-forward credit, or in any month in which exports pass 40% of the month's sales (s24(2)-(3), r39(4)-(5)).
• IRD refunds within 60 days of a four-month claim and 30 days of an exporter's; later than that it pays 15% a year interest (s24, r47).
• A refund above Rs 20,000 is paid only into the claimant's bank account (r45).
• Refund claims lapse three years after the end of the tax period (s25D).
• Government bodies and government-owned companies paying a contractor deposit 30% of the VAT directly in the supplier's name; the supplier counts it against its own VAT (s25C1, r6ग).

Records a VAT-registered business keeps

A registered business keeps a monthly VAT account (Annex 7), a purchase book (Annex 8) and a sales book (Annex 9) for each tax period, certified by itself; tax and abbreviated invoices issued and received; import and export documents; credit and debit notes; accounts and cash records; and a register of samples and free goods received and given (r23-r25). Records are kept six years (r23(4)) and may be inspected during business hours. IRD may assess within four years of a return, with no limit for fraud (s20(4)).

The purchase book lists, per bill, the date, the supplier's invoice or customs declaration number, the supplier's name and PAN, the total, exempt purchases and imports, taxable purchases and imports with their VAT, and capital purchases with their VAT. The sales book lists the date, invoice number, buyer's name and PAN, the total, exempt sales, taxable sales with VAT, and exports with the country and the export declaration's number and date.

VAT penalties, fees and interest

Returns four months overdue can stop the business's imports and exports; six months running without a return publishes its name, freezes its credit and suspends its registration; twelve months of nil or missing returns cancel the registration (s18(3), s30(2), s11(1)(e)). The Director General may waive the additional fee for reasons beyond the taxpayer's control (s19(4)).

A worked example: Rs 1,00,000 of VAT paid 73 days after the due date is three months (two whole and a part): an additional fee of Rs 2,500 and interest of Rs 3,750. The return filed ten days late adds Rs 1,000, because 0.05% × 10 days × Rs 1,00,000 = Rs 500 is less than the minimum. More cases are in penalties and appeals.

Review and appeal

A taxpayer who disagrees with an assessment applies to the Director General for administrative review within 30 days, paying the undisputed tax and a quarter of the disputed tax (s31A). An appeal to the Revenue Tribunal is filed within 35 days of the review decision, paying the undisputed tax and depositing half of the disputed tax and fine, or a bank guarantee for it; the quarter already deposited counts (s32, s33). The Finance Act 2083 also offers an amnesty: tax due plus 1% by the end of Poush 2083 (14 January 2027) waives the interest, fees and fines (s41, s44-s46).

How BRAccount handles VAT

BRAccount charges 13%, 5% and 0% on the bill, applies the electronic-payment relief, and keeps the IRD sales and purchase books and the Annex 10 return with its due date and late charges. It has a reverse-charge template for services bought from abroad. Its credit rules leave out invoices older than a year, abbreviated invoices and blocked items, and it refuses VAT on the bills of an organisation set as PAN-only. It is not yet listed by the IRD as billing software; the IRD billing software guide says what that means.

Questions

Sources

• मूल्य अभिवृद्धि कर ऐन, २०५२ (VAT Act 2052), as amended to the Finance Act 2082
• मूल्य अभिवृद्धि कर नियमावली, २०५३ (VAT Rules 2053), 27th amendment
• आर्थिक ऐन, २०८३ (Finance Act 2083), Nepal Gazette 2083/03/30
• IRD: Finance Act 2083 handbook on exemptions, concessions and other provisions (revised edition)
• BRAccount's page-by-page reading of the VAT Act (137 pages) and VAT Rules (105 pages), 28 October 2026Every figure on this page is cited to its section; the reading notes are kept with the software.