Value Added Tax

1. Application of VAT: Cosmos p. ltd having its registered office in Jawalakhel, Lalitpur transferred
some goods costing Rs. 1 million to its branch at Bangladesh. In the same month, the Bangladesh
branch transferred some goods costing Rs. 500,000 to its head office in Nepal. Gross profit Margin of
head office is 20% and that of branch is consolidated at the end of each FY in books of Head Office.
Discuss the VAT impact on above transactions.
2. Place of Supply: A lawyer practicing in Nepal provides consultancy service to a legal firm in United
Kingdom. The legal firm of the UK used that service to release a person in USA. Where is the place of
supply of service as per VAT Act/Rules?
3. VAT Registration: Nepal Philanthropic Society is a ―Company not Distributing Profit registered
under the Company Act, 2063. The source of fund of this company comes from membership fees,
donation from the member groups and other outsiders. The company deals with various goods other
than those mentioned in schedule 1 to VAT Act 2052. Annual turnover of this company ranges from
Rs. 50 lakh to 75 lakh every year. Though profits earned by the company are not for the distribution
amongst its members, more than 50% of its profits are utilized towards activities related to the
Corporate Social Responsibilities (CSR) every year. The members of the company when approached
by IRD staffs for VAT registration contended that the company need not be registered in VAT. As you
are the tax consultant of the entity you are required to comment this statement by the company.

4. Business Transfer: Mr. Prakash was engaged in the hardware business and now wants to quit from
this business. He wants to sell and transfer the business to a willing buyer. He has the followings assets:

Furniture & Fixtures Rs. 300,000 made to order but no VAT paid
Computer System Rs. 100,000 purchased by paying VAT
Hardware Stock Rs. 2,500,000, out of which Rs. 20 lakhs was VAT paid

Mr. Dark offered to purchase the business for Rs. 2,600,000 and approached the VAT office for
effecting the transfer. What are the procedures to be adopted, various commitments required and VAT,
if any, to be paid by Mr. Dark?

5. Temporary Registration: PQR Pvt. Ltd. is engaged in supply of taxable goods and is an unregistered
under VAT. There is an exhibition scheduled on Poush 3, 2073 and the company wants to participate
in the exhibition for promoting its products. Exhibition is for a period of one week. Since the company
is unregistered, it claims that registration is not mandatory as its participating in exhibition for a week
only. In other hand, Tax Officer demanded deposit of Rs. 500,000 citing the reason that the company
is participating in exhibition. Also, Tax Officer asked for the submission of tax return. Since the
transactions occurred on Poush, 2073, the company is in the view that it will submit tax return by Magh
25, 2073.
Comment referring to the provisions of VAT Act/Rule. Also, mention the fine to be paid by the
company, if any, on non-compliance of registration.

6. Taxable Value: M/s Thirsty Drinkers Ltd. has sold a kind of drink to non VAT registered party for Rs.
10,000. As per the retail price published by the same company under the direction of IRD, the retail
price is Rs. 12,000. The company has collected VAT from the party on the amount of Rs. 10,000 saying
that it has given the trade discount to the party and the trade discount can be deducted to arrive at the
transaction value. But the assessing officer insists to collect VAT on the published price. As an expert,
give your opinion on this.

Developed and Compiled by CA. Shesh Mani Dahal 1

 Value Added Tax

7. VAT Collection: Lumbini Municipality has called up an auction to sell its fixed assets (Computer,
Furniture & Fixtures) as it is shifting to new office with modern infrastructures. Detail of amount
collected from auction is as follows:

Fixed Assets Amount (Rs.)

Computer 50,000
Table 30,000
Chairs 40,000
Furniture 140,000
Miscellaneous Assets 70,000
Total Amount Received 330,000
The officer of Lumbini Municipality did not collect VAT on this sale. Is he correct? Answer in the
light of VAT Act, 2052.

8. VAT on Used Goods: Kathmandu reconditions has following transaction details for the month of
Chaitra 2071. Calculate the VAT payable/receivable for the month, assuming that the transactions are
of used goods.
Purchase (including VAT) Sales (excluding VAT)
(Rs.) (Rs.)
Chairs 20,000 25,000
Motorbike 35,000 45,000
Refrigerator 10,000 9,000
Cupboard 8,000 7,000
Bookshelf 12,000 15,000
Scooter 25,000 In stock
What would be your calculation if the transactions were of brand new goods and not the reconditioned
goods?

9. VAT on Wood: Compute, how much VAT amount can be claimed for refund by the trade link on 30
Shrawan 2071.
Nepal Government has determined the Royalty @ Rs. 800 per cu.fit on wood for national forest.
suppliers submitted a bid quoting @ Rs. 900 per cu.fit for 2000 cu.fit wood to Kathmandu forest office
to purchase the wood on auction. The suppliers have been awarded the auction of the wood. In addition,
the suppliers have purchased 1000 cu.fit wood from co- operative forest @ Rs. 700 per cu.fit for its
business. Determine the VAT amount on these purchases with reference to the provisions of Value
Added Tax Act, 2052.

10. Refund to Tourist: Mr. Banwarilal, an Indian tourist, visited Nepal in the year 2016. He purchased
taxable goods of NPR 16,000 from Pokhara and decided to take the purchased goods along with him
while going back to India via Sunauli boarder by his own vehicle. He seeks your advice on refund of
VAT paid by him on purchase of such goods. What would be your answer if he had purchased the
taxable goods worth NPR 26,000 instead of NPR 16,000?

11. Refund to Tourist: Mr. John entered to Nepal via Birgunj with his family on 1st Aswin 2072 and
visited so many places in Nepal. The detail of few expenses incurred in Nepal by Mr. John & his family
members are as follows:
Developed and Compiled by CA. Shesh Mani Dahal 2
 Value Added Tax
Amount paid to tour operator for family tour package amounted to Rs. 339,000 including Rs.
39,000 applicable VAT.
i) Mr. John purchase one laptop costing Rs. 100,000 and paid applicable VAT on it.
ii) Mr. John Paid to Hotel in Kathmandu for cost of lodging, foods & other services Rs. 226,000
including Rs. 26,000 VAT.
iii) Mr. John with his family visited orphanage home in Kathmandu and donated a fridge costing Rs.
50,000 and paid applicable VAT on it.
At the time of departure from Tribhuvan International Airport, Kathmandu, Mr. John submitted all vat
invoices to the counter of IRD and Mr. John is carrying the laptop purchased in Nepal along with all
his other belongings.
Advise Mr. John how much VAT refund he will get.

12. Reverse VAT: Consider who should pay and how much VAT in the following circumstances with
explanations according to the relevant section and rules:
a) Mr. Buddhi Bahadur builds his house through a contractor who is not registered in VAT for own
living. The total value of the contract comes to Rs. 90 lakhs. He gets built another house from the
same contractor for a cost of Rs. 45 lakhs for letting out on hire.

13. Bank Guarantee: Naya Nepal Ltd. is engaged in the business of manufacturing juice. The product of
the Industry has good market in India and Nepal. The company exports the juice to India as well as
the same is sold in the local market. Sales turnover of the company for the following quarters are as
follows:

Period Export to India Rs. Local sales Rs. In

In Lacs Lacs
Shrawan- Ashoj 2065 65 85
Kartik- Poush 2065 80 45
Magh- Chaitra 2065 67 100
Baisakh- Asadh 2066 136 44
Shrawan- Ashoj 2066 165 85

The company is scheduled to export 900 M tones of the juice to India and the necessary raw materials
are imported at CIF value at Raxaul from South Africa for Rs. 80 lacs. Also the company is scheduled
to import raw materials amounting to Rs. 20 lacs for the local sales. The company seeks your advice
on whether it avails Bank guarantee facility against VAT. If yes what would be the amount of Bank
Guarantee required.

14. General Household Pvt. Ltd. provides you the following information:
Particulars Period Amount
Total Sales 2074 Baishakh to Chaitra 4,054,000
2074 Chaitra 360,000
Export 2074 Baishakh to Chaitra 2,400,000
2074 Chaitra 200,000
The company seeks your opinion based on Value Added Tax Act, 2052 and wants to know:
Developed and Compiled by CA. Shesh Mani Dahal 3
 Value Added Tax
a. Does the company get bank guarantee facility for importing finished goods?
b. Does the company get bank guarantee facility for importing raw materials?
c. Does the company get tax refund facility in the month of return submission?

15. Bank Guarantee and VAT Refund: Heat & Cool Pipe Industry Ltd. is a pipe manufacturing company.
The raw material imported during various months are as follows:

Month Raw Material

2069 Baisakh 10,000 Kg
2069 Jestha 11,000 Kg
2069 Ashadh 9,000 Kg
The sale done by company in various periods are as follows:

Month Local Sale Export Sale Total Sales

2068 Baisakh -Chaitra 4,200 kg 4,800 kg 9,000 kg
2068 Baisakh 600 kg 100 kg 700 kg
2068 Jestha 150 kg 550 kg 700 kg
2068 Ashadh 300 kg - 300 kg
2069 Baisakh - 900 kg 900 kg
2069 Jestha 300 kg 300 kg 600 kg
2069 Ashadh 400 kg 500 kg 900 kg

The company marks up 15% to its product. The selling price is same for local and export market. Raw
material required per kg of output is 2 kg.
i) Determine whether the company can claim bank guarantee facility for VAT at the time of
import of raw material. Also specify the provisions of VAT Act, 2052 in this regards.
ii) The company's VAT account showed following balances. Can company claim refund
immediately after closure of month? Specify the provision of the VAT Act.

Month Balance Remarks

Baisakh 40,000 Payable
Jestha 120,000 Receivable
Ashadh 140,000 Receivable

16. VAT Refund: M/s ABC Limited has shown the following sales and purchases without VAT. The
policy of the company is to claim VAT refund as and when eligible as per the VAT Act. Calculate the
amount of credit and refund that can be claimed in each month by mentioning the relevant provision of
the act.
Months Sales Purchases Export
Bhadra 500,000 600,000 45%
Ashwin 520,000 500,000 25%
Kartik 600,000 500,000 45%
Mangsir 450,000 500,000 35%
Poush 320,000 500,000 45%
Developed and Compiled by CA. Shesh Mani Dahal 4
 Value Added Tax
Magh 400,000 500,000 25%
Falgun 350,000 500,000 35%

17. VAT Refund: Rai Pvt. Ltd. working in Bhojpur has the following amounts of sales and purchases
excluding VAT. Can VAT refund be claimed in Falgun return?
Month Sales Purchase
Bhadra 500,000 600,000
Aswin 520,000 500,000
Kartik 520,000 500,000
Mangsir 450,000 500,000
Poush 320,000 500,000
Magh 400,000 500,000
Falgun 350,000 500,000

18. Deregistration: Mr. Ram has taken voluntary registration in VAT on 2070.05.02. He feels it
troublesome to comply with legal requirements of VAT Act, and wish to cancel his registration. He
seeks your assistance in this regards. Answer the following queries placed to you by Mr. Ram:
i) When can he apply for cancellation of registration?
ii) The books of Mr. Ram showed following balances at the date of cancellation.
Account head Closing balance (Rs.) Market value on date of cancellation (Rs.)
Items on Items on Total Items on which Items on which Total
which VAT which VAT VAT input was VAT was not
input was was not claimed. claimed.
claimed. claimed.
i) Inventory 10 lakh 5 lakh 15 lakh 12 lakh 7 lakh 19 lakh

ii) Fixed assets 20 lakh 7 lakh 27 lakh 11 lakh 3 lakh 14 lakh

What shall be the tax implication on the above items on the date of cancellation? State the provision
of Act.

19. VAT Calculation: M/s Ankur Plastics has the following transactions, calculate the amount of VAT
payable or receivable for the month of Jestha 2077. Rs.
i) Purchase of Raw material 650,000
ii) Purchase of packing material 100,000
iii) Purchase of Fuel for generator 23,000
iv) Purchase of Fuel for Vehicle 15,000
v) Purchase of a vehicle 2,300,000
vi) Sale of finished goods 1,500,000
vii) Opening VAT receivable 120,000
viii) Purchase of raw material includes an item for Rs. 35,000 which was purchased (bill dated) on
Baisakh 2076, which could be accounted only this month since the invoice was misplaced.
ix) Opening VAT receivable balance has been running from Poush 2076.

Developed and Compiled by CA. Shesh Mani Dahal 5

 Value Added Tax
x) All of above amounts are exclusive of VAT.

20. VAT Calculation: M/s Makalu Food and Beverages had following VAT attractive transactions in the
month of Poush 2068. From these details and notes below, calculate the
VAT payable/receivable for the month of Poush.

Details Amount in Rs.

Sales 10,000,000
Purchase of raw material – local 4,500,000
Purchase of raw material – import 5,500,000
Purchase of packing material 500,000
Purchase of motorcycle 150,000
Purchase of bus for staff 1,000,000
Purchase of delivery van 800,000
Purchase of diesel for staff bus 50,000
Purchase of petrol for van/motorbike 25,000
Payment of consultancy services to a party in India 90,000
Telephone expenses 15,000
Dealers’ meet expenses 45,000
Miscellaneous expenses 85,000
Opening VAT receivable 9,000
 Above items are excluding VAT.
 Miscellaneous expenses includes Coke and Fanta purchased for dealers' meet for Rs. 10,000 and gift
items purchased though abbreviated tax invoice of Rs. 25,000.

21. Proportionate VAT Credit: Mr. Pure operates dairy and is registered to VAT. His transaction for first
month of operation are as follows:
Particulars Quantity Amount

Purchase of Cow milk 20,000 liters. 1,000,000

Purchase of Powdered Milk 20,000 kg. 800,000

Purchase of Sugar (for ice cream) 18,000 kg. 1,080,000

Sale of Cow milk (pasteurized) 18,000 liters. 1,080,000

Sale of Ice cream 17,500 liters. 4,500,000

Advertisement for Ice cream (from registered party) 50,000

Purchase of office furniture (from registered party) for 200,000
sale counter of milk and ice-cream.
Packing expenses for milk delivery (from registered 25,000
party)
2,000 kg of Powder milk was added to cow milk for sale and rest was used for ice-cream production.
Developed and Compiled by CA. Shesh Mani Dahal 6
 Value Added Tax
All above data are excluding VAT and VAT is paid & collected on goods which are not exempted.
Calculate the amount of VAT:
a) Paid
b) Collected
c) Net VAT to be Paid

22. XYZ Pvt. Ltd. imports/purchases the taxable raw materials such as Iron Ingots and Steel Plates to
manufacture them into different furniture items as well as agriculture tools.
Details of total imports excluding Input VAT are as follows:
Cost of Iron Ingots declared by XYZ Pvt. Ltd. Rs. 3,00,000
Revised cost fixed by Customs Officer Rs. 3,50,000
Freight Rs. 50,000
Insurance Rs. 5,000
Import Duty @ 6%
In addition, it has also purchased following raw materials:
Steel plates (exclusive of VAT) Rs. 1,00,000
Woods (exclusive of VAT) Rs. 35,000
The products manufactured out of the above raw materials are sold out with the details as given below:
Agriculture tools (VAT exempt items) Rs. 2,50,000
Furniture Rs. 3,00,000
Find the ratio between taxable and non taxable sales and calculate the amount of Input VAT that XYZ
Pvt. Ltd. is entitled to claim under sec 17 (3) of VAT Act.

23. VAT Calculation: Janaki Garment Pvt. Ltd. engaged in production of readymade wear and registered
with VAT at Inland Revenue Department has the following transactions during Jestha 2068. The
Company has VAT refundable Rs. 33,450 as on 31/01/2068.
Required to calculate:
a) amount of VAT collection on sales
b) input tax available for set off and
c) the net VAT payable/receivable to/from Inland Revenue Office.

Sales for the month (before VAT as applicable) Rs.

Export of garments 7,000,000
Local sale 1,200,000
Purchases and expenditures:
Particulars Amount(Rs.) VAT (Rs.)
Cloth purchase 5,000,000 650,000
Garment material purchase 400,000 52,000
Packing materials 50,000 6,500
Carton for export Packing 100,000 13,000
Developed and Compiled by CA. Shesh Mani Dahal 7
 Value Added Tax
Parts for machine 150,000 19,500
Telephone Expenses 50,000 6,500
Purchase of cloth press machine spare parts ( in stock) 200,000 26,000
Misc. factory consumables 200,000 26,000
Plant and factory building repair 100,000 13,000
(No VAT bill on payment of Rs. 200,000)
Purchase of cloth pack machines. 600,000 78,000
Purchase of delivery VAN 800,000 104,000
Purchase of a car 1,600,000 208,000
Construction of a shed for production work 400,000 52,000
Additional information:
Van and Car has been purchased under loan arrangement for 70% of the amount and the blue book is
in the name of ABC Bank Ltd.

24. VAT Calculation: Supreme Garment Pvt Ltd had the following transaction in the month of Ashwin
2069. Calculate the VAT payable/receivable from the information below.
Particulars (Rs.)
Purchase of clothes 3,500,000
Material for stitching 200,000
Packing materials 300,000
Special packing for export 200,000
Loose tools for machineries 50,000
Payment of consultancy charges abroad 250,000
Purchase of bus for staff transportation 1,000,000
Purchase of motorcycle of hire purchase 200,000
Telephone expenses 38,000
Purchase of diesel for generator 40,000
Purchase of diesel for bus 12,000
Purchase of petrol for motorcycle 15,000
Purchase of computers 45,000
Purchase of soft drinks 6,000
Purchase of Stationery 14,000
Local Sale 2,500,000
Export Sale 5,000,000

Additional information:
Opening VAT receivable for the month was Rs. 45,780
Diesel for bus for Rs. 8,000 and soft drinks for Rs. 3,000 was purchased through abbreviated tax
invoice. Stationery was purchased from non-registered vendor. Items above are exclusive of VAT.

Developed and Compiled by CA. Shesh Mani Dahal 8

 Value Added Tax
25. Proportionate VAT Credit: A manufacturer has the following details during the month of Chaitra
2072. Calculate VAT receivable/payable.
Rs.
Opening VAT Receivable 20,000
Purchase of raw materials 200,000
Salary expenses 50,000
Reverse VAT attractive service fees 10,000
Purchase of motorcycle 150,000
Office supplies inclusive of VAT 22,600
Total sales for the month 400,000
Out of total production 80% is VAT attractive and 50% of total production is exported.

26. VAT Calculation: XYZ Ltd. exported goods worth Rs. 15,000,000 that contained the taxable and non-
taxable goods at a ration 8:7. The company also had sales in the domestic market worth Rs. 31,625,000
that contained taxable sales of Rs. 29,625,000 and the rest is non- taxable sales. Besides, the domestic
taxable sales included Rs.14,125,000 sold through abbreviated tax invoice.
The company paid VAT on purchase of taxable Goods Rs. 30,00,000 and on taxable service Rs.
200,000. The opening input credit of VAT carried forward is Rs. 300,000.
From the above information, calculate the following:
i) Statement of taxable and non-taxable sales; and
ii) Statement of VAT receivable or payable at the end.

27. Circumstances beyond Control: Binita is a proprietor of a VAT registered firm. For the month of
Shrawan 2073, she has collected VAT of Rs. 300,000 which she has to deposit within 25th Bhadra,
2073. But on Bhadra 10, 2073, she has delivered a baby boy due to that she could not deposit the VAT
amount within Bhadra 25. The tax officer wants to levy additional fee of 10% per annum on her. She
has submitted an application to Director General, Inland Revenue Department on Bhadra 26, 2073 for
waiver of additional fee levied by the tax officer as the non-payment of VAT was due to the
circumstances beyond her control. Can Director General waive that additional fee levy imposed by the
tax officer? Give your opinion.

28. Answer the following questions.

i) Appeal: An Inland Revenue Officer has passed Assessment Order under section 23(ga) of Value
Added Tax Act. The order states that goods sold by the firm is under invoiced. Consequently the
firm is ordered to pay additional tax, fine and fee for the under invoiced amount. The proprietor of
the firm is considering to file petition in the Revenue Tribunal. Advise the firm.

ii) Registration: Best Computers (P) Limited filed statements which included following:
 Purchases Rs. 52 lacs
 Sales Rs. 22 lacs.
 Rent Rs. 84 thousands
 Telephone expenses Rs 24 thousands.

The Inland Revenue Officer has served notice for not registering under VAT. Advise the company.

29. Loss of Goods: State the provisions of the Act for set off VAT for losses of goods due to fire.

Developed and Compiled by CA. Shesh Mani Dahal 9

 Value Added Tax
30. Penalties: What are the penalties mentioned in section 29 of the act on the following infringements:
i Registration as mentioned in section 10(1) and (2) related infringement.
ii An unregistered person issuing an invoice or documents showing collection of tax.
iii On obstruction in inspection by a tax officer.
iv On infringement of the VAT act and the rules.
v To erase and edit the data in software of approved Electronic Billing System

31. Market Value: Elaborate the provisions relating the market value and its determination under VAT
Act.

32. Market Value: What is market Value as per Value Added Tax 2053? Mention the relevant provision
applicable to market Value as per Value Added Tax 2053?

33. Assessment: Can tax officer assess the tax under Value Added Tax 2058? List out the situations under
which the tax officer may assess the tax.

34. Recovery of VAT Dues: With the VAT Return Poush end 2073, XYZ Securities service Pvt. Ltd.,
VAT due is NPR 12 crore. IRD has information several times (previous months return) to pay the Vat
due in time but the management of the company didn‘t pay any amount until the months of Falgun end,
which is increased by NPR. 4 Corer with return of Magh end 2073. On the 1st Chaitra 2073 IRD request
to Nepal Rastra Bank to hold the Bank account of XYZ Securities service Pvt. Ltd. for three months
and NRB issued letter to Delta Bank to hold Bank account for three months with request of IRD. Can
IRD hold the bank account of XYZ Securities service Pvt. Ltd., due to nonpayment of Vat in timely?
35. Assessment: What are the powers given to the tax officer under sec 23(2) of VAT Act for the purpose
of making an assessment under sec. 18 and sec. 20?

36. Books and records: What are the types of accounts and records to be kept by a taxpayer under VAT
Act, 2052? What are their contents?

37. Books and records: What are the records to be maintained by registered dealer dealing in used or
second hand materials?

38. Debit and Credit Note: Discuss the provision of Debit and Credit Note in VAT Rules.

Developed and Compiled by CA. Shesh Mani Dahal 10