Overview of VAT in Nepal 2082/83 (2026)

Broadly NPR 50 lakh for goods and NPR 30 lakh for services or mixed supplies, on a rolling 12-month basis. Some sectors must register regardless of turnover.

Most VAT-registered taxpayers file monthly by the 25th of the following Nepali month through the IRD taxpayer portal. Sector exceptions exist on application.

VAT is governed by the Value Added Tax Act 2052 (1996) and the VAT Rules 2053 (1997), administered by the Inland Revenue Department under the Ministry of Finance. The Act sets the rate, registration thresholds, the zero-rated and exempt schedules, the input-credit and refund mechanism, and the penalty regime, while the Rules and IRD circulars provide the operational detail.

The standard VAT rate has been 13% for many years and remains at 13% in 2026, so businesses budget around a stable headline rate. What does change year to year through the Finance Act is the list of mandatory-registration sectors and the items in the zero-rated and exempt schedules, alongside the registration thresholds. The headline rate is the constant; the schedules and sectoral lists are the moving parts.

Zero-rated supplies are those listed in the VAT Act's zero-rate schedule — most importantly exports and supplies to special economic zones — where no VAT is charged on the sale but the supplier can still claim back VAT paid on inputs. Exporters typically claim a VAT refund on their input tax through the IRD, which is what makes Nepali exports VAT-neutral. Zero-rated is therefore very different from exempt despite both showing no VAT on the invoice.

Exempt supplies — listed in the VAT Act's exempt schedule — cover essentials such as basic foodgrains, medicines, education, health services, residential rent and public transport, where no VAT is charged on sale. Unlike zero-rated supplies, however, an exempt-supply business cannot claim input VAT credit on its purchases, so VAT paid on inputs becomes a cost. Many essentials sit in the exempt list as a public-policy choice.

Two routes trigger mandatory registration: crossing the turnover threshold (broadly NPR 50 lakh for goods or NPR 30 lakh for services or mixed supplies over a rolling 12 months), and membership of a mandatory-registration sector regardless of turnover (such as liquor, electronics, software, restaurants with a bar, lawyers, accountants, consultants). The threshold for services was raised from an earlier NPR 20 lakh, so do not rely on older guidance.

You must register within 30 days of crossing the threshold, and where a mandatory sector applies, registration is required from the start of operating in that sector. Operating above the threshold or within a mandatory sector without VAT registration is a breach of the VAT Act 2052, with backdated registration and a per-period penalty consequence. The 30-day window is straightforward in principle but easy to miss in practice.

A VAT-registered business charges 13% on taxable sales (output VAT) and pays 13% on its taxable purchases (input VAT), then pays the net difference — output VAT minus input VAT — to the IRD as part of the monthly return. Where input VAT exceeds output VAT (for example for exporters), the excess can be refunded or carried forward. The mechanism is what gives VAT its name — tax on the value added.

The standard VAT return is monthly, filed through the IRD taxpayer portal by the 25th of the following Nepali month, alongside payment of the net VAT due. Nil returns must be filed for months with no transactions, to keep the registration in good standing. Bi-monthly or trimester cadences are available for certain sectors (such as tourism and brick manufacture) on application, but monthly is the default for the vast majority of registered taxpayers.

Yes. Where input VAT exceeds output VAT for an extended period — most commonly for exporters with zero-rated outputs and taxable inputs — the excess can be refunded by the IRD on application, subject to verification. For non-export situations, persistent excess credit can be carried forward. The refund mechanism is what makes the VAT system work for exporters without exporting the embedded VAT to their foreign customers.

PAN is the universal taxpayer identifier under the Income Tax Act 2058 and is required broadly — for individuals, employers, businesses. VAT is a separate indirect-tax registration under the VAT Act 2052 that becomes mandatory once turnover crosses the threshold or a mandatory sector applies. Every VAT-registered business has a PAN, but most PAN holders do not have a VAT registration unless they trigger one of the two routes.

Operating above the threshold or within a mandatory sector without VAT registration triggers a per-period penalty under the VAT Act 2052 — commonly cited at NPR 10,000 per tax period of default — alongside recovery of the VAT that should have been collected and interest on the unpaid amount. Stacked over months, the total can substantially exceed the original tax, which is why timely registration is far cheaper than catching up.

Yes. The VAT Act allows voluntary registration even where the threshold has not been crossed, which can suit a business that supplies VAT-registered customers (who can recover the VAT charged), or an exporter wanting to claim input refunds. Voluntary registration is a strategic choice and brings the full monthly filing and compliance load with it, so it should be weighed against the administrative cost before opting in.

VAT applies broadly to services supplied in Nepal, and the framework now reaches digital and online services consumed in Nepal — including under specific provisions targeting non-resident digital-service providers introduced by recent Finance Acts. The exact mechanics evolve, so an online-business operator should confirm the current treatment with the IRD and a tax adviser, especially where cross-border digital services or non-resident supplies are involved.

The Inland Revenue Department periodically reviews VAT filings, and an audit can examine the sales and purchase records, input-credit claims, refund applications and category treatments. The taxpayer is expected to produce supporting documents and to reconcile output and input positions. Where the audit raises issues — wrong category, missing returns, inadmissible input credit — the IRD can assess additional VAT with interest and penalty, subject to the taxpayer's right to respond and appeal.

A VAT-registered taxpayer must keep VAT invoices, purchase and sale records, monthly returns and payment vouchers, input-credit calculations and refund claims, for the period required by the VAT Act and the Income Tax Act — commonly five years — so they can be produced in an audit or assessment. Maintaining a clean, sequential record of VAT invoices is the single most important practical habit, because most VAT disputes turn on document trails.

VAT and TDS coexist on the same invoice. A VAT-registered service supplier issuing a VAT invoice has TDS withheld at the lower rate (commonly 1.5% on a VAT invoice for resident service providers), whereas a supplier on a PAN bill (no VAT) faces a higher 15% TDS. So whether a supplier is VAT-registered changes the TDS rate the payer applies, which is why getting the invoicing right — VAT bill or PAN bill — has cash-flow consequences for both sides.

When setting up a business and choosing the right moment to register, when entering a mandatory sector, when an IRD audit or assessment raises VAT issues, and when the entity is in a cross-border or zero-rated supply chain that depends on input-credit recovery. A lawyer or tax adviser confirms the right registration timing, the correct category treatment, and the filing cadence, and represents the business if the IRD raises a VAT question.