VAT Registration in Nepal

The Two Numbers That Decide It

VAT registration in Nepal turns on one question: has your business crossed the turnover threshold in the last twelve months? There are two thresholds, and which one applies to you depends on what you sell.

Those figures are in Rule 6(1) of the VAT Rules 2053, as consolidated to the Twenty-Seventh Amendment (2082), and the thirty-day deadline is in Section 10(2) of the VAT Act 2052 and Rule 7(2).

If your number is 20 lakh, your number is old

The services and mixed threshold was NPR 20,00,000 until 15 Jestha 2081 (28 May 2024), when the VAT (Twenty-Sixth Amendment) Rules 2081 raised it to 30 lakh. The Finance Act 2081 made the matching change to Section 11(1)(f) of the Act. That was FY 2081/82 — not 2082/83, which is how a great deal of Nepali web content dates it, ourselves included until this guide.

Turnover Means the Higher of Purchases or Sales

This is the trap. Rule 8 does not measure your sales. It says the amount of a transaction, for registration purposes, is determined on the basis of whichever is higher of the purchase or the sale value over the past twelve months.

So a trader who bought NPR 60 lakh of stock and sold NPR 40 lakh of it has crossed the goods threshold on purchases, with two-thirds of the stock still sitting in the godown. A business that stocks up ahead of a season, or imports a container it expects to sell over eighteen months, can be liable to register in a year it considers quiet. Rule 8 also requires you to keep the records substantiating your turnover at the place of business and produce them when the Tax Officer asks.

The Day-One Sector List No Longer Exists

Nearly every Nepali guide to VAT still carries a list of businesses said to require VAT registration from the first day of trading regardless of turnover — hardware, sanitary, furniture, fixtures, furnishing, automobiles, electronics, marble, education consultancy, party palaces, restaurants with a bar, colour labs, boutiques, liquor, trekking, rafting, and so on.

That list was removed from the law in 2078 (2021). It lived in Section 10(2) of the VAT Act 2052. The current Section 10(2), in the Inland Revenue Department’s own consolidated text of the Act, reads in full:

The change was made by the Finance Ordinance 2078 and kept in force by the Finance Act 2078. In the IRD’s consolidated Act the old list survives only in footnote 38, under the heading “the former provision”, alongside seven other superseded versions of the same sub-section.

Two things follow. First, if a consultant tells you that your furniture shop or your education consultancy must register on day one because of the sector it is in, ask which provision says so — there isn’t one any more. Second, when that list was alive, most of it only applied inside a Metropolitan City, Sub-Metropolitan City or a Department-specified area; the geography mattered. That distinction is now of historical interest only.

What Does Force Registration Regardless of Turnover

The NPR 10 lakh “bank loan” trigger — handle with care

You will read almost everywhere — including in the Inland Revenue Department’s own published FAQ — that taking a business loan above NPR 10 lakh compels VAT registration. It is not in the VAT Rules. The rule that once listed extra registration circumstances, Rule 7(5), was removed entirely by the Twenty-Second Amendment Rules 2077 — and even when it existed it covered stock value, telephone and rent expenditure, and business location, not loans.

What does exist is Rule 13, which says a person who is already registered must quote their VAT registration number on, among other documents, applications to banks and financial institutions for loans above NPR 1 lakh for commercial or industrial purposes. That is a rule about using your number, not about being made to get one, and the NPR 1 lakh figure is not NPR 10 lakh. Somewhere the two were fused.

We flag this rather than settle it. The Rules are the law and they no longer contain the trigger; but the IRD’s own FAQ still states it, and an Inland Revenue Office may still apply it in practice. If a bank loan is your only reason for registering, ask your IRO to point to the provision before you commit — registering is easy to do and expensive to undo.

The Indirect Compulsions — the ones that actually catch people

You may be under every threshold and still find that you cannot trade without registering, because the obligation has been placed on the person paying you.

Voluntary Registration

Section 9 of the VAT Act lets a small vendor below the threshold register voluntarily. There is one hard bar and one lock-in that are worth knowing before you apply.

The bar. The proviso to Section 9 excludes a taxpayer who files a pre-estimated income return under Section 4(4) of the Income Tax Act 2058 — the presumptive, D-class taxpayer paying a flat NPR 7,500 / 4,000 / 2,500 with no accounts. You cannot be on presumptive income tax and voluntarily VAT-registered at the same time. Registering means giving up the presumptive regime and starting to keep real books.

The lock-in. Section 11(1a): a small trader who registers voluntarily cannot cancel that registration for one year.

How to Register

Fee. There is no registration fee in the Rules. The Schedule–1 form carries a NPR 5 revenue stamp. A duplicate certificate, if the original is lost or torn, used to cost NPR 100 — that fee was abolished by the Twenty-Eighth Amendment Rules 2083, which struck the words requiring it from Rule 14.

After Registration: the Filing You Have Signed Up For

The default tax period is one month of the Bikram Sambat calendar, and the return is due in the Schedule–10 format within 25 days of the month ending — filed whether or not you traded that month (s.18(1); r.26(1)). Tax is payable on the same date (s.19(1)).

The four-monthly option, and the NPR 1 crore figure

Rule 26(3B), as it now stands after the Twenty-Seventh Amendment, allows the Department to fix a four-monthly (chaumasik) filing period, on application, for:

• small and medium industries — added by the Twenty-Eighth Amendment Rules 2083;
• print, electronic, or print-and-electronic publication or broadcasting houses; and
• any taxpayer with annual turnover up to NPR 1,00,00,000 (one crore).

This is the single most useful and least-published fact about Nepali VAT compliance. Most newly registered small businesses sit under one crore and can file three times a year instead of twelve, on application, cutting their compliance load by three quarters.

It is also, almost certainly, where the persistent rumour that “the VAT threshold is one crore” comes from. One crore is real, but it is the filing-frequency figure, not the registration threshold. Note too that the older version of this rule listed sectors instead — brick industries, hotels, tourism, cinema halls, transport operators — and those have been replaced by the turnover test. If you were told you qualify because you run a hotel, check again.

Invoices and records

• You must issue an invoice on every supply (s.14(1)); the buyer commits an offence by not taking one (s.14(3)).
• Taxable goods worth more than NPR 10,000 moved outside a Department-specified area must travel with the invoice (s.14(4)).
• Invoices for the sale of imported goods must show at least the first four digits of the HS code from the import declaration (r.17, as amended in 2081).
• An unregistered person must not issue a tax invoice or collect tax; tax so collected is recovered from them (s.15).
• Keep a self-certified purchase and sales book for each fiscal year — a duty that binds unregistered dealers in taxable goods too (s.16(3)).
• Retain records for six years (r.23(7)). The Department may also take continuous access to your computerised accounts (s.16(1a)).

Penalties

Late payment also carries an additional fee of 10% a year (s.19(2)) and interest at 15% a year (s.26(2)), which keep running through administrative review and appeal. And if a return goes unfiled for four months past its due date, the Tax Officer may block your imports and exports (s.18(3)).

Cancelling Your Registration — and the Sting

Section 11(1) lists when registration is cancelled: the body corporate closes or is sold; the sole proprietor dies; a partnership dissolves; you stop making taxable supplies; you file nil or no returns for twelve consecutive months; your turnover falls below the thresholds; or you were registered by mistake.

You apply within 30 days of the event in the Schedule–11 format (r.12(1)), submit documents for audit within 15 days, and the Tax Officer must either cancel or tell you he will not within three months. If he does neither, you need not file returns for periods after that (s.11(3)) — a real protection against being left in limbo.

What Changed Recently

Electronic billing is a separate thread. Section 14A lets the Department, by notice, compel named taxpayers to issue invoices electronically and connect to the Central Billing Monitoring System (CBMS). The turnover at which that bites has been moving downward — it was widely reported at NPR 25 crore, then 20 crore from April 2026, and the FY 2083/84 budget signals 10 crore. If you are anywhere near those numbers, confirm the current IRD notice rather than relying on any published figure, including this one.

Frequently Asked

Is the VAT rate in Nepal still 13%?

Yes, 13% remains the standard rate. What changed in FY 2083/84 is that the Government now has the power to set multiple rates not exceeding 13% by Gazette notice, and has introduced a 5% rate for ride-sharing and for electricity supplied to end users. A high-level committee is studying a multi-rate structure, so single-rate VAT should no longer be assumed permanent.

Can I register for VAT before I have any turnover?

Yes — Section 10(1) contemplates exactly that, an application before commencing the transaction, and Rule 7(1) covers the case where you can reasonably anticipate crossing the threshold. What you cannot do is register if you deal only in Schedule–1 exempt goods or services, and you cannot hold voluntary VAT registration while filing presumptive income tax under s.4(4).

My turnover fell below the threshold. Am I deregistered automatically?

No. Section 11(1)(f) makes falling below the threshold a ground for cancellation, but cancellation follows an application and an audit. Until the Tax Officer notifies you, you keep filing. And if you registered voluntarily, s.11(2) lets you keep the registration despite being under the threshold, by applying with the last twelve months’ final return.

Do I need VAT to get an EXIM code?

Yes. VAT registration is a prerequisite for an EXIM code, which is why importers and exporters register regardless of turnover in practice. See our EXIM code guide.