Know the exact turnover thresholds (NPR 50L goods vs NPR 20L services) that mandate 13% VAT registration under IRD law.
PAN (स्थायी लेखा नम्बर) and VAT (मूल्य अभिवृद्धि कर) are the twin tax registrations administered by the Inland Revenue Department (IRD). While PAN tracks income tax, VAT registration obligates a business to collect a 13% indirect consumption tax from buyers, offset input tax paid on raw materials, and remit the net balance to the government treasury monthly.
Crossing the VAT threshold without registering is a severe tax crime in Nepal. The IRD conducts market audits using banking records and billing data. If an unregistered business crosses NPR 20 Lakh in service sales, IRD tax officers will retroactively assess 13% VAT on the entire turnover, slap an immediate 25% penalty, and charge 15% annual compounding interest, easily wiping out multiple years of business profits.
Trading physical consumer goods falls under the NPR 50 Lakh threshold. Consulting, IT services, restaurants, events, and repairs are classified as services with a strict NPR 20 Lakh threshold.
Under the VAT Act, retailers selling hardware, sanitary ware, electrical equipment, motor parts, jewelry, timber, or liquor must register for VAT before selling their very first item.
Track your cumulative sales over the last 365 days (not just the fiscal year). The moment trailing turnover hits NPR 20L (services) or NPR 50L (goods), apply for VAT within 30 days.
Maintain approved Purchase and Sales registers (खरीद तथा बिक्री खाता). Every month by the 25th, file your VAT return on the IRD portal: Net VAT Payable = Output VAT Collected - Input VAT Paid.
| Business Nature | Annual Turnover Threshold | Registration Trigger | Filing Frequency |
|---|---|---|---|
| Goods Trading Only (General Retail) | NPR 50,00,000 (50 Lakh) | When trailing 12-mo sales > 50L | Monthly (by 25th of next month) |
| Services Only (IT, Consulting, Agency) | NPR 20,00,000 (20 Lakh) | When trailing 12-mo sales > 20L | Monthly (by 25th of next month) |
| Mixed Goods & Services (Restaurants) | NPR 20,00,000 (20 Lakh) | Lower service threshold applies | Monthly (by 25th of next month) |
| Mandatory Sectors (Hardware, Liquor) | NPR 0 (Immediate) | Must register before opening | Monthly (by 25th of next month) |
| Bi-Monthly Option (Small Manufacturers) | Under special IRD permission | Turnover under specific caps | Every 2 months (Trimester) |
Nepal introduced the Value Added Tax Act 2052 (1997) replacing traditional sales tax, with a universal flat rate of 13%. To formalize the economy, the Inland Revenue Department integrates real-time billing via the Central Billing Monitoring System (CBMS) for large merchants. Furthermore, individual consumers paying via digital QR or cards at registered VAT merchants are legally entitled to an immediate 10% cash rebate on the VAT paid under recent Finance Act provisions.
Rajesh operated a small hardware shop under a simple PAN for 2 years, clocking NPR 38 Lakh in annual sales. He thought: "I am below 50 Lakh, so I don't need VAT."
During a market inspection, the Inland Revenue Office informed Rajesh that hardware and sanitary retail is a "Mandatory Day-1 VAT Category" regardless of turnover. To avoid a massive closure order, he immediately registered for VAT, began issuing computerized tax invoices, and claimed input tax credits on all cement and pipe supplies, stabilizing his business legally.
Goal & Dilemma: Deciding whether to stay under normal PAN or transition to mandatory Value Added Tax (VAT).
Tax collected from customers on commercial sales invoices.
Tax paid to suppliers backed by valid tax invoices.
Monthly Sales = NPR 10,00,000 (+ NPR 1,30,000 Output VAT). Monthly Raw Material Purchases = NPR 6,00,000 (+ NPR 78,000 Input VAT). Net VAT Payable to IRD by 25th = 1,30,000 - 78,00,00 = NPR 52,000.
Assuming service businesses have the same NPR 50 Lakh threshold as goods.
Service businesses must register for VAT at just NPR 20 Lakh in turnover.
Failing to collect valid VAT purchase invoices from suppliers.
Always demand VAT invoices with the supplier's verified PAN to claim Input Tax Credits.
Missing the 25th of the month filing deadline even when sales were zero.
Always file a zero return (शून्य विवरण) on the IRD portal if no business occurred that month.
Yes. Any business registered in PAN can voluntarily apply for VAT registration on Day 1 to claim input tax credits on expensive equipment and build corporate credibility.
Under the VAT Act, delayed filing attracts a penalty of 0.1% per day of the gross sales amount or NPR 1,000 per month (whichever is higher), plus 15% annual interest on unpaid VAT.
No. Export of services outside Nepal against convertible foreign currency is taxed at 0% VAT rate (शून्य दर), allowing software exporters to claim full input VAT refunds on office equipment.
Under the Value Added Tax Act, businesses selling Goods must register in VAT if annual turnover exceeds NPR 50,00,000 (50 Lakhs); for Services or mixed transactions, the threshold is NPR 20,00,000 (20 Lakhs).
Yes. Any registered business can voluntarily apply for VAT registration at any time, allowing them to issue VAT bills and claim 13% input tax credits on their business purchases.