Value Added Tax (VAT) is a critical component of the Nepali revenue system. For small business owners, navigating the Inland Revenue Department (IRD) requirements can be daunting. This guide simplifies the core concepts of VAT compliance.
1. Who Needs to Register for VAT?
Registration for VAT is mandatory if your annual turnover exceeds the following thresholds:
- Goods: NPR 50 Lakhs
- Services: NPR 20 Lakhs
- Mixed (Goods & Services): NPR 20 Lakhs
2. The Billing Process
Once registered, you must issue tax invoices for every sale. A standard tax invoice must include your PAN/VAT number, the customer's PAN (if applicable), a description of goods/services, and the 13% VAT amount clearly separated.
3. Monthly Filing and Payment
VAT returns must be filed and taxes paid within 25 days of the following month. Failure to file on time results in significant penalties and interest. Accurate record-keeping of both Purchase VAT (Input) and Sales VAT (Output) is essential to claim VAT credits.
Managing VAT manually is prone to errors. KhataIn provides a dedicated module to track your VAT invoices and prepare your reports, making tax season a breeze.
