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Value Added Tax (VAT) is the single largest source of indirect tax revenue for the Government of Nepal. Every registered business — whether a trading house in New Road, a restaurant in Thamel, an IT consultancy in Sanepa, or an importer clearing goods at Birgunj customs — must charge VAT at 13%, file a VAT return by the 25th of every Nepali month, and issue invoices in the format prescribed by Rule 17 of the VAT Rules, 2053. This 2026 guide (FY 2082/83) explains the rate, the registration threshold, the exact VAT bill format, Schedule 1 exempt items, filing timelines, and the penalties introduced under the 46th Amendment via Finance Act 2081.
Quick Answer — VAT in Nepal: Nepal applies a flat 13% VAT under the VAT Act, 2052 (1995). Registration is mandatory when annual turnover exceeds NPR 50 lakh (goods), NPR 30 lakh (services), or NPR 30 lakh (mixed). VAT returns must be filed monthly by the 25th of the following Nepali month through the IRD portal at ird.gov.np. Schedule 1 lists VAT-exempt items (basic food, medicine, education, passenger transport), and Schedule 2 lists zero-rated transactions (exports, SEZ supplies).
Legal Framework: VAT Act 2052 and the 46th Amendment
VAT in Nepal is governed by three primary legal instruments:
Value Added Tax Act, 2052 (1995) — the principal statute, enacted by Parliament and administered by the Inland Revenue Department (IRD).
Value Added Tax Rules, 2053 (1996) — the subordinate rules prescribing registration procedure, invoice format (Rule 17), record-keeping (Rule 23), and refund procedure.
Finance Act, 2081 (46th Amendment) — the most recent amendment effective for FY 2081/82 and continuing into FY 2082/83, updating thresholds, penalties, and exempt-item schedules.
Authoritative text of all three is published on the Nepal Law Commission portal and the IRD website.
VAT Rate in Nepal 2026 (2082/83)
Nepal operates a single-rate VAT system. Since VAT was introduced on 16 November 1997 (replacing the old sales tax, entertainment tax, contract tax, and hotel tax), the rate has always been a flat 13% and remains unchanged for FY 2082/83.
| Category | VAT Rate | Legal Reference |
|---|---|---|
| Standard taxable supplies | 13% | Section 7, VAT Act 2052 |
| Schedule 1 — Exempt | No VAT (out of scope) | Section 5 + Schedule 1 |
| Schedule 2 — Zero-rated | 0% (with input credit) | Section 7(3) + Schedule 2 |
VAT Registration in Nepal — Thresholds and Process
Turnover Threshold for Mandatory VAT Registration
Under Section 10 of the VAT Act 2052 and Rule 7 of the VAT Rules 2053 (as updated by Finance Act 2081), a business must register for VAT within 30 days of crossing any of the following annual turnover limits:
| Business Type | Annual Turnover Threshold (12-month) | Registration |
|---|---|---|
| Goods only (trading, manufacturing) | Above NPR 50,00,000 (50 lakh) | Mandatory |
| Services only | Above NPR 30,00,000 (30 lakh) | Mandatory |
| Mixed (goods + services) | Above NPR 30,00,000 (30 lakh) | Mandatory |
| Specified sectors (liquor, hardware, electronics, software, health clubs, restaurants, trekking, hotels with bar, tax consultancy, auditing, education consultancy, marble/dolomite, ice-cream, motor parts, etc.) | Any turnover (no threshold) — must register from first sale | Mandatory |
Businesses below the threshold may also register voluntarily; this is common for exporters who want to claim VAT refund on inputs.
Step-by-Step VAT Registration Process
Log in to the IRD Taxpayer Portal at ird.gov.np (you need an active PAN number first).
Open the "VAT Registration" form and provide: PAN number, business name, registered address (municipality/ward), nature of business, estimated annual turnover, start date, and director/owner details.
Upload the supporting documents:
Company/Firm Registration Certificate (OCR / Department of Industry / Local Ward)
Citizenship of proprietor / all directors
Premises proof — rent agreement (notarized) or land ownership (Lalpurja)
Bank account details
Photo of the business premises with signage
Submit online and receive a submission number. Visit your IRD office (Inland Revenue Office / Taxpayer Service Office) for biometric verification of the owner/director.
IRD issues the VAT Registration Certificate (VAT ko Pramanpatra) — which must be displayed at the business premises.
VAT Bill Format in Nepal (Rule 17) — Sample Tax Invoice
The VAT bill (tax invoice / कर बीजक) must follow the format prescribed under Rule 17 of the VAT Rules, 2053. Every registered business must issue a tax invoice on every taxable supply and must retain a copy for 6 years (Section 16 + Rule 23).
Mandatory Fields on Every VAT Invoice
| # | Field (English / Nepali) | Requirement |
|---|---|---|
| 1 | Heading "Tax Invoice" / "कर बीजक" | Must be clearly printed at the top |
| 2 | Supplier name, address, PAN | Exactly as registered with IRD |
| 3 | Invoice serial number | Sequential, unique, cannot be skipped |
| 4 | Invoice date (AD + BS) | Both calendars recommended |
| 5 | Customer name, address, PAN | Customer PAN required if registered or transaction ≥ NPR 10,000 |
| 6 | Description of goods / services | Clear, item-wise |
| 7 | Quantity, unit, rate | Per-item detail |
| 8 | Discount (if any) | Shown as separate line |
| 9 | Taxable value (net of discount) | Subtotal before VAT |
| 10 | VAT rate — 13% | Stated explicitly |
| 11 | VAT amount (NPR) | Calculated on taxable value |
| 12 | Grand total (in words) | Nepali or English, must match figure |
| 13 | Signature of authorised person | With company seal |
Copies of the VAT Bill (Triplicate System)
Original (Sakkal): Given to the buyer
Duplicate: Retained by supplier for IRD audit
Triplicate: Retained in the supplier's invoice book
VAT Bill Sample (Nepali Format)
कर बीजक / TAX INVOICE
ABC Traders Pvt. Ltd. | New Road, Kathmandu | PAN: 301234567 | Phone: 01-4225xxx
Invoice No: 2082/83-00142 | Date: 2082/12/10 (2026-03-23)
Buyer: XYZ Suppliers | Lalitpur | PAN: 302987654
| SN | Description | Qty | Rate (NPR) | Amount (NPR) |
|---|---|---|---|---|
| 1 | Office Chair (model X) | 10 | 5,000 | 50,000 |
| 2 | Office Desk (model Y) | 5 | 8,000 | 40,000 |
| Subtotal (Taxable Value) | 90,000.00 | |||
| VAT @ 13% | 11,700.00 | |||
| Grand Total | 1,01,700.00 | |||
In words: One lakh one thousand seven hundred rupees only.
Prepared by: _______________ | Authorised Signatory: _______________ (with seal)
Abbreviated Tax Invoice (Small Retail)
Under Rule 17(Ka), retailers with high-volume over-the-counter sales (restaurants, supermarkets, petrol pumps, pharmacies) may issue an abbreviated invoice where the transaction is up to NPR 10,000. Key differences:
VAT is shown as "VAT inclusive" — no separate line required
Customer PAN is optional
Single copy is sufficient
If the customer demands a full tax invoice, it must be issued (Section 14A)
Schedule 1 — List of VAT-Exempt Items in Nepal
Goods and services in Schedule 1 of the VAT Act 2052 are exempt from VAT. A business dealing exclusively in Schedule 1 items is not required to register for VAT. The following is the updated list after the 46th Amendment via Finance Act 2081:
| # | Category | Examples |
|---|---|---|
| 1 | Basic agricultural products | Paddy, rice, wheat, maize, flour, unprocessed pulses, fresh vegetables, fresh fruit, fresh meat, fish, eggs, milk, firewood |
| 2 | Goods of basic needs | Salt, iodised salt, piped drinking water, kerosene (household), LPG for cooking |
| 3 | Live animals & products | Live poultry, livestock, semen, fish fry, honey, silkworm cocoons |
| 4 | Agricultural inputs | Seeds, saplings, chemical & organic fertilizers, approved pesticides, animal feed, tractors & specified agricultural machinery |
| 5 | Medicine, medical & health services | Human medicines, vaccines, surgical instruments, hospital services, ambulance, pathology labs, X-ray, family planning |
| 6 | Education services | Tuition by schools, colleges, universities; research; examination fees |
| 7 | Books, newspapers, printed material | Books, periodicals, newspapers, bulletins published in Nepal |
| 8 | Artistic, cultural, carving | Handmade paintings, statues, traditional handicrafts, religious statues |
| 9 | Passenger transport services | Buses, microbuses, taxis, air passenger (domestic), ropeway passenger; (cargo transport is taxable) |
| 10 | Personal (imported) effects | Household goods of migrants, diplomats' personal imports within allowance |
| 11 | Financial / insurance services | Interest on loans, life insurance premium, reinsurance, securities trading on NEPSE |
| 12 | Land & buildings | Sale of land, rent of residential buildings (commercial rent is taxable) |
| 13 | Betting, casino, lottery | Covered under a separate tax regime, hence outside VAT |
| 14 | Postage, revenue stamps, cheques, bank notes | Government-issued |
| 15 | Electricity (generation & distribution) | Supply by NEA and licensed IPPs |
Schedule 2 — Zero-Rated Transactions
Unlike Schedule 1 (where no VAT applies and input credit is blocked), Schedule 2 items are taxed at 0% but the supplier can claim full input VAT credit. This is why exporters in Nepal receive large VAT refunds.
Export of goods and services outside Nepal
Supplies to industries inside Special Economic Zones (SEZs)
Domestically produced machinery sold to hydropower projects
Supplies to diplomatic missions (against exemption certificate)
VAT on Imported Goods
VAT is levied at the customs point on all imports under Section 12 of the Act. The computation is:
Import VAT = 13% × (CIF Value + Customs Duty + Excise + Any other charge)
The VAT so paid at customs is allowed as input VAT credit in the monthly return, provided the import is for business use and a Bhansar Pragyapan Patra (customs declaration) is held.
VAT Return Filing in Nepal — Monthly Deadline and Process
Filing Frequency
| Taxpayer Type | Filing Cycle | Deadline |
|---|---|---|
| Standard VAT-registered taxpayer | Monthly | 25th of the following Nepali month |
| Publishers of books & newspapers (specified) | Trimesterly (4 months) | 25th of the following month after cycle |
| Hotels & tourism (specified) | Trimesterly | 25th of the following month after cycle |
How to File the VAT Return (Online)
Log in to the IRD Taxpayer Portal at ird.gov.np with your PAN & password.
Go to Taxpayer Portal → VAT → VAT Return → New Filing.
Select the return period (Nepali month & year).
Enter: taxable sales, zero-rated sales, exempt sales, taxable purchases (domestic + import), exempt purchases, adjustments, and carried-forward VAT credit.
The system auto-computes the output VAT, input VAT, and the net VAT payable/refundable.
Submit the return and pay any VAT due via connectIPS / mobile banking / bank voucher. Download the return receipt for your records.
VAT Liability Formula
VAT Payable = Output VAT − Input VAT − VAT Credit Carried Forward
| Scenario | Result | Action |
|---|---|---|
| Output VAT > Input VAT | Net VAT Payable | Pay by 25th of next Nepali month |
| Input VAT > Output VAT | VAT Credit | Carry forward; if credit lasts 4 consecutive months, file refund application under Section 24 |
| Exporter with 0-rated sales | Large Input VAT | Apply for refund any time (Rule 45) |
Record Keeping — Kharid Khata & Bikri Khata
Under Section 16 + Rule 23, every registered business must maintain VAT records for 6 years:
Bikri Khata (Sales Register): all tax invoices issued, with date, buyer, taxable value, VAT, total
Kharid Khata (Purchase Register): all purchase invoices (domestic + import), categorised by stock, fixed asset, capital goods, exempt
Stock Register: opening stock, additions, issues, closing stock
Import / Export Register: with Bhansar Pragyapan Patra numbers
If you use IRD-approved billing software (such as IMS-compliant systems), physical registers are optional — the electronic log is sufficient.
Penalties for VAT Non-Compliance
| Violation | Penalty (as amended by Finance Act 2081) | Legal Section |
|---|---|---|
| Failure to register despite crossing threshold | NPR 10,000 per tax period of default | Section 29(1)(ka) |
| Failure to issue tax invoice | NPR 1,000 per invoice + 50% of tax underpaid | Section 29(1)(cha) |
| Failure to file VAT return on time | 0.05% of tax due per day, minimum NPR 1,000 per return | Section 29(1)(chha) |
| Late payment of VAT | 15% per annum interest + additional 10% fee | Section 19 + 26 |
| Issuing fake invoice / false return | 100% of tax evaded + imprisonment up to 2 years | Section 29A |
PAN vs VAT in Nepal — Key Differences
| Parameter | PAN (Permanent Account Number) | VAT Registration |
|---|---|---|
| Mandatory? | Yes — for every business, professional, and salaried person | Only if turnover crosses threshold or in specified sectors |
| Format | 9-digit number | Same 9-digit PAN; status is simply "VAT active" |
| Purpose | Income tax identification | VAT charge, collection & credit |
| Return filing | Annual income tax return (D-01 / D-03) | Monthly / trimesterly VAT return |
A related read: PAN Card Registration in Nepal explains how to get your 9-digit PAN before applying for VAT; and Tax Rate in Nepal 2082/83 covers income tax slabs and corporate rates alongside VAT.
Deregistration / Cancellation of VAT
Under Section 11 of the Act, a business can apply to cancel its VAT registration when:
The business has closed down, been sold, or merged
Annual turnover has dropped below the threshold for 12 consecutive months
The proprietor has died (heirs must apply within 35 days)
The application is filed via the IRD portal and the Tax Officer issues a cancellation order after verifying all dues are cleared.
Tip — Get VAT-Related Documents Notarized: Rent agreements, partnership deeds, board resolutions authorising VAT registration, and director appointment letters are routinely notarized before being submitted to the IRD. Notary Nepal provides same-day notary public and certified translation services for such documents. For foreign directors, the apostille / attestation chain may be required on source documents.
Frequently Asked Questions
This article is for informational purposes only and does not constitute legal advice, advertisement, or solicitation. Notary Nepal and its team are not liable for any consequences arising from reliance on this information. For legal advice, please contact us directly.