In Nepal, VAT was introduced on 16th November 1997. This duty was levied in place of the sales duty, hotel, contract, and entertainment tax. Still, it couldn’t be enforced completely until FY 1998/99 due to political insecurity and strong opposition from the business community. VAT replaces the old sales duty, Contract duty, hotel levy, and entertainment levy. It has been designed to collect the same profit as the four levies it replaced. Since the collection of both customs duties and income duty depends, to a great extent, upon the effectiveness of Vat, it’s anticipated to help enhance revenue collection. There are 4 major types of duty in that country. i.e. Income Tax, Value- added duty, Excise Duty, and custom Act. The most common levy is Value added levy. It’s more extensively used there than Income duty. In that country, levies are classified into two types, direct levies, and indirect levies. Direct levies are those which are paid directly by the individual or association to the imposing authority. They’re levied on income and profits. Indirect levies are those which aren’t paid directly by the individual or association to the imposing authority. They’re levied on goods and services and not on income and profits.
Income duty
Income duty is a duty charged on taxable income. Taxable income is obtained by subtracting the allowed expenditures from the revenue and the earnings.
Excise Duties
In Nepal in 1955 customs and excise departments were established. In 1966, a separate
The exercise department came into use. Currently, there exist only 3 sources of excise revenues:
- Excise from contract duty.
- Excise from the agricultural product.
- Excise from industrial manufacturing.
Donation and contribution
The limit can be increased if GON is notified in Nepal Gazette that donation can be given in some cases for a particular purpose, also the quantum can be claimed as per announcement if all conditions are fulfilled. If any donations made to any duty-exempted association are honored by IRD also reduction can be claimed from the total assessable income in the time in which payment is made but Expenditure incurred for Heritage protection or Development of Sports (Sec 12 Ka).
The Following expenditure is eligible for deduction from Assessable Income:
Expenditure incurred by a person on conservation and creation of ancient. religious or artistic heritages established in Nepal and Expenditure on the construction of public structures related to the development of games and sports. donation to Prime Minister Disaster Relief Fund and Reconstruction Fund Established by the GON (sec 12 Kha)
All donations made to the Prime Minister Disaster Relief Fund and Reconstruction Fund established by GON are Eligible for deduction without any Limitation.
Other major levies and freights in Nepal
Education Services
Scholars going abroad for advanced education at 2 percent of the foreign exchange institution offered by Banking and Financial Institutions (BFIs).
Structure Development
Petrol and diesel significance in Nepal will be subordinated to this duty at Rs ten at the customs points.
Pollution Control
Petrol and diesel imports within Nepal will be paying these levies at NPR1.5 per litter.
Telecom Services
New connections or ownership transfers on fixed-line services will be charged Rs500 per connection, and mobile phone recharges will pay an extra 2 percent of the total value.
Casino Royalty
Licensed casino people, per license, will pay NPR 40 million per annum, and operating ultramodern machines and equipment will pay NPR 10 million per annum.
Take away
Though the payment of duty is a moral obligation, and the taxpayer is apprehensive of the fact that profit generated by the government through levies is used for the weal of the society but due to high personal income duty rates and other irrationalities prevailing, there are also other duty rates, vittles’, and concessions under different taxation sections for individuals and realities across varying situations of income.
