Value Added Tax Act, 2052 E alonwith Financial year provisionwww.lacommission.gov.np
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Value Added Tax Act, 2052 (1996)
Date of Royal Seal and Publication
2052-12-7 (20 March, 1996)
Amendment:
1. Value Added Tax (First Amendment) Act, 2058 2058.10.4 (17 Jan. 2002)
2. Some Nepal laws Amendment Act,2063 2063.6.28 (14 Oct. 2006)
3. Republic Strengthening and Some Nepal Laws
Amendment Act, 2066 (2010)1 2066.10.7 (21 Jan. 2010)
Act Number 14 of the year 2052 (1966)
An Act Made to levy and recovery Value Added Tax
Preamble: Whereas, it is expedient to increase the mobilization of revenue
needed for the economic development of the country, by making the process of
revenue recovery effective and to levy the revenue in effective manner by
systematizing the process of recovering the Value Added Tax on all kinds of
transaction including sale, distribution, transfer, import and export of goods
and services and to realize the tax;
Now, therefore, Parliament has enacted this Act in the Twenty-fourth
year of the reign of His Majesty King Birendra Bir ikram Shah Dev.
1. Short Title and Commencement: (1) This Act may be called as the
"Value Added Tax Act, 2052 (1996)".
(2) It shall come into force on such date as Governm nt of Nepal
by publishing a Notification in the Nepal Gazette may appoint.2
Each year Amended version of the Financial Act is put at the end. 1 This Act came into force on 15 Jestha 2065, "Prasasti" and the word "Kingdom" has been deleted. 2 This Act came into force since 2054.8.1 (16 Nov 1997) by Notification in Nepal Gazette dated 2054.5.2 (01
Aug. 1997).
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2. Definitions: Unless the subject or the context otherwise requir s in this
Act, -
(a) "Tax" means the value added tax to be levied pursuant to this
Act.
(b) "Transaction" means the act of supplying any good r services.
(c) "Taxable Transaction" means the Transactions as referred to in
Sub-section (1) of Section 5.
(d) "Taxable Value" means the value to be determined pursuant to
Section 12 in relation to any good and service.
(e) "Goods" means both movable and immovable property.
(f) "Service" means anything other than goods.
(g) "Supply" means the act of selling, exchanging transferring of any
goods and services or the act of licensing or the act of contracting
by taking consideration.
(h) "Consideration" means anything to be obtained for cash, goods,
service or value.
(i) "Import" means the act of importing of any good r service into
the Nepal in accordance with the prevailing laws.
(j) "Export" means the act of exporting of any goods or services
outside of Nepal pursuant to the prevailing law.
(k) "Market Value" means the value determined pursuant to Section
13.
(l) Person" means any person, firm, company, associati n institution,
partnership institution, co-operative, joint venture, trust or fund
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and this term also includes the government body which are
involved in the taxable transaction with or without the objective
of profit making, religious organization, charity association or
other similar association and their branch or sub-branch thereof.
(m) "Registered Person" means the person registered pursuant to
Section 10 to carry out the transaction.
(n) "Registration Number" means the number provided to the
registered person pursuant to Section 10.
(o) "Supplier" means the person who supplies any goods and
services.
(p) "Recipient" means the person who receives any goods and
services.
(q) "Taxpayer" means the person involved in the taxable transaction.
3(q1) "Tax period" means the period in which the taxpayer has to
submit tax return pursuant to Section 18.
(r) "Department" means any Department under the Ministry of
Finance designated by Government of Nepal as to be responsible
for tax administration.
(s) "Director General" means the Director General of the
Department.
(t) "Tax Officer" means the tax Officer, 4Chief Tax Officer, Chief Tax
Administrator, Director General appointed by Government of
Nepal for the purpose of this Act or any Officer designated by
3 Inserted by First Amendment. 4 Amended by First Amendment.
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Government of Nepal authorizing to exercise the powers of Tax
Officer under this Act.
(u) "Prescribed" or "as prescribed" means prescribed or as prescribed
in the Rules made under this Act.
3. Tax Officer may be appointed or Designated : For the propose of
this Act Government of Nepal may appoint Tax Officers in required
numbers and, Government of Nepal, if deems necessary, m y designate
any Officer to act as a Tax Officer.
4. Jurisdiction of a Tax Officer: The jurisdiction of a Tax Officer shall
be as prescribed by the Government of Nepal.
5. Value added Tax to be levied: (1) Notwithstanding anything
contained in this Act, the value added tax shall be levied on the
following transactions:-
(a) On goods and services supplied within Nepal,
(b) On goods and services imported into Nepal,
(c) On goods and services exported outside of Nepal.
(2) The tax shall be levied on the value of each taxable
transaction.
(3) Notwithstanding anything contained in Sub-section (1), the
tax shall not be levied on the transaction of goods and services as
referred to in Schedule -1. In addition, the tax paid before the purchase
of such goods and services shall not be allowed to educt pursuant to
Section 17 and refund pursuant to Section 24.
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55A. Tax not to be levied on Transfer of ownership of transactions
may not affect: Notwithstanding anything contained elsewhere in this
Act, in cases where a registered person sells the transaction being
carried out by him/her to any other registered person, not tax shall be
levied on such transfer of ownership. The registered p rson shall, in so
selling the transactions, give information thereof to the Department as
prescribed.
Provided that, the registered person who purchases such
transactions shall bear the tax liability of the prdecessor.
65B. Power to order for registration: In cases where the Tax Officer has a
reasonable ground to believe that a person required to be registered is
carrying out any transactions without getting registered, he/she may
order such person to get registered.
Provided that, a person who claims that he/she is not required to
get registered for carrying out transactions valued p to the amount
prescribed pursuant to Section 9, shall have the burden to furnish
evidence therefor.
6. Place and Time of supply: For the purpose of assessment or
realization of tax pursuant to this Act, the matter whether the supply of
any goods or services is made within or outside of Nepal shall be
determined as prescribed.
(2) For the purpose of assessing and realizing the tax pursuant to
this Act, the time of supply of any good or service which occurs first out
of the time mentioned hereunder shall be regarded as the time of supply
of such goods or services:-
(a) At the time in which the supplier issued the invo ce,
5 Inserted by First Amendment.
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(b) In case of supply of goods, at the time in which the
recipient received or took the goods from the place
of transaction of supplier,
(c) In case of supply of service, at the time in which the
service is rendered,
(d) At the time in which the supplier received
consideration for the goods and services.
(3) Notwithstanding anything contained in Sub-section (2), the
following time shall be regarded as the time of supply on the following
circumstances:-
(a) In case of the telecommunication service to be
supplied continuously and other similar type of
public services, the time in which the invoice is
issued.
(b) Where according to the Contract, if the mode of
payment of the value of any good or service is made
in installment or partial basis in more than one day
the day, in which the payment is made or the day
mentioned in the Contract in which the payment
has to be made, the time which occurs first.
(c) In case of goods and services where one does not to
get the tax deduction facility pursuant to this Act
for their use, the time in which such goods and
service is used.
(4) If more than one circumstances may appear to be applied at a
time, as prescribed in Sub-section (2) regarding the time of supply in
6 Inserted by First Amendment.
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any transaction the Director General shall determine such a time
objectively.
7. Rate of Tax: (1) The rate of tax to be levied in any fiscal year shall be
in a single rate as prescribed in the Financial Act made for that fiscal
year.
(2) Notwithstanding anything contained in Sub-section (1), in the
transaction of goods and services as mentioned in Schedule-2, the tax
rate shall be zero.
8. Assessment of Tax and Collection: (1) A registered person shall
assess and collect tax at the taxable value in accordance with the
provisions of this Act and Rules framed thereunder.
(2) The recipient of services in Nepal from a person who is not
registered and is outside of Nepal shall have to assess and collect the tax
at the taxable value in accordance with this Act and Rules framed
thereunder.
9. Exemption for Small Vendor: Notwithstanding anything contained
in this Act, an exemption may be provided to a small vendor, having a
prescribed annual taxable transaction threshold, from the requirements
of registration and filing of tax returns and from such requirements as
may be prescribed.
Provided that, a small vendor may, if he/she desires to register
his/her transactions get his/her transactions registered upon completing
the process as referred to in Section 10.
10. Registration: (1) Every person engaged in any transactions at the ime
of commencement of this Act shall apply within Ninety days from the
date of commencement of this Act to the Tax Officer, in the prescribed
format for registration.
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(2) Every person, who intends to engage into a transaction after
the commencement of this Act, shall apply to the Tax Officer in the
prescribed format for registration, before the commencement of such
transactions.
(3) Notwithstanding anything contained in Sub-section (1) and
(2), a person who carries out the transaction of gods or services as
mentioned in Schedule 1, shall not be required to ge registered.
(4) The Tax Officer shall register each person who has duly
submitted an application under Sub-section (1) or (2) and shall issue
registration certificate in a prescribed format along with the registration
number within the prescribed time frame.
(5) The registered person shall display the registrat on certificate
in a conspicuous place at his/her principal place of transaction and if
there are more than one places of transaction, it shall be displayed in a
conspicuous manner at each place, other than the principal one, a copy
of the registration certificate attested by a Tax Officer.
(6) A registered person shall use his/her registraton number for
all transactions relating to value added tax, excis and customs duty and
to other prescribed transactions as well.
(7) Every registered person shall inform the Tax Officer within
Fifteen days of any changes in the information pertaining to the
application for registration as required under Sub-section (1) and (2).
11. Cancellation of Registration: (1) The Tax Officer may cancel the
registration of a registered person in any of the following circumstances:
(a) In the case of body corporate, if the body corporate
is closed down, sold or transferred or if the body
corporate otherwise ceases to exist;
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(b) In the case of an individual ownership, if the owner
dies;
(c) In the case of a partnership firm, if it is dissolved;
(d) If a registered person ceases to be engaged in
taxable transactions;
(e) If registered mistakenly.
7(1a.) In circumstances other than those mentioned in Sub-
section (1), any entrepreneur carrying out small trnsactions who has
got his/her transactions registered voluntarily shall not be entitled to
cancel such registration of his/her transactions voluntarily until
completion of one year from the date of registration of the transaction.
An entrepreneur carrying out a small transaction who intends to get
registration of such transactions to be canceled after completion of one
year from the date of registration of the transaction may file an
application as prescribed to the concerned Tax Officer for cancellation
of registration. If such an application is so filed, the concerned Tax
Officer shall cancel registration of such transaction.
(2) The cancellation procedure of a registration shall be as
prescribed.
(3) All the goods and services that remain available for use at the
time of the cancellation of registration (capital goods as well) on which
tax deduction facility has already been taken, tax shall be assessed and
recovered as prescribed.
7 Inserted by First Amendment.
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12. Taxable Value: (1) Except otherwise provided in this Act, in case only
the money is consideration, the taxable value shall be the price which
the supplier takes from the recipient.
(2) The following amounts shall be included in a taxable value:
(a) The amount of all expenditures relating to
transportation and distribution which was borne by
the supplier in connection with the transactions,
and the amount of profit; and
(b) Excise and all other tax amounts save the tax
imposed under this Act.
8Explanation: For purpose of this Clause, "other
tax amounts" means such tariffs, fees and charges as
specified by the yearly Financial Act.
(3) Taxable value shall not be included in the amount of
discount, commission or other similar commercial rebat granted on
value in supplying goods or services.
(4) The taxable value of any goods or service exchanged or
bartered shall be equal to the market value of the goods or services so
exchanged or bartered.
(5) Except otherwise provided in this Act, the taxable value for
any imported goods shall be its customs value including transportation,
insurance, freight, commissions of agents and other p rsons, plus
customs duties, countervailing duties plus any other axes if levied on
imports, except the value added tax.
8 Inserted by First Amendment.
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(6) If the value of any goods or services is found to be much
lower than the prevailing market value, the taxable value of such goods
or services shall be equal to the market value.
(7) The taxable value of goods or services supplied for partial
consideration shall be equal to the market value.
(8) The deposit, given in respect of goods or servic s, shall not be
held to be taxable value until the supplier applies the deposit as a
consideration for the supply.
13. Market Value: 9 (1) The market value of goods or services supplied on
a particular day shall be determined taking into account the
consideration to be received for similar kind of goods or services freely
supplied between unconnected persons.
(2) For the purpose of this Section, the procedure for the
determination of market value shall be as prescribed.
(3) If the market value of any goods or services could not be
determined under Sub-section (1) and (2), it shall be determined in
accordance with the procedure determined by the Dircto General.
14. Invoices to be Issued: (1) Every registered person is required to issue
an invoice to the recipient, in supplying any goods and services save the
circumstances as prescribed.
(2) The format of an invoice shall be as prescribed.
(3) It shall be the duty of the recipient to obtain n invoice.
15. Unregistered Person not to collect Tax: (1) A person who is not
registered shall not issue an invoice or other document showing the
collection of tax and shall not recover the tax.
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(2) If a person who is not registered collects tax, the tax so
collected shall be assessed and recovered from him/her.
16. Accounts of Transactions to be mentioned: (1) A taxpayer shall
maintain an up-to-date accounts of his/her transactions of the tax period
under Section 18 and such accounts, wherever placed shall be made
available for inspection to the Tax Officer on his/er demand.
(2) The following matters shall also be included in the accounts
so maintained by the taxpayer:-
(a) Date of transactions,
(b) Registration number, Value of each transaction,
(c) If the other party of the transaction is registered,
and
(d) Other prescribed matters related with transaction.
(3) A registered person shall use, for the purpose f keeping
accounts, the purchase and sales book certified by the concerned Tax
Officer.
(4) Every taxpayer shall preserve the accounts of transactions for
a period as prescribed.
10(5) The accounts maintained by a taxpayer by fulfilling the
procedures specified by this Act or the Rules framed h reunder shall be
recognized unless proved otherwise.
1116A.Records processed by computer to be acceptable as evidence:
Notwithstanding anything contained in the prevailing law the record of s
9 Amended by First Amendment. 10 Inserted by First Amendment. 11 Inserted by First Amendment.
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taxpayer maintained in the computer installed in the Department or
offices thereunder shall be acceptable as evidence for purposes of tax,
except it is otherwise proved.
17. Tax Deduction: (1) A registered person may deduct the amount of tax
which he/she has collected against the tax he/she had paid or due in
importing or receiving goods or services related with his/her own taxable
transactions.
(2) Notwithstanding anything contained in Sub-section (1), it
may be provided that no deduction or only a partial deduction shall be
granted in the case of the following goods that can be used for personal
purposes as well as for business purposes:
(a) Aeroplanes,
(b) Motor vehicle,
(c) 12………..
(d) Other high priced items as prescribed.
(3) If the entire portions of goods or services transacted in a
month were not used for taxable transactions, the tax previously paid on
the goods or services shall be deducted as prescribd for the portion that
was solely used for taxable transaction of the goods or services.
(4) If goods or services, for which deductions facilities pursuant
to this Section have been allowed, cease to be used for taxable
transaction, such goods or services shall be treated s sold at the
immediate market value and tax shall be recovered as prescribed.
12 Deleted by First Amendment.
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(5) Notwithstanding anything contained in Sub-section (1),
deduction facility to be given for a registered person who deals with the
used goods shall be as prescribed.
13(5a) The concerned taxpayer shall be allowed to deduct tax
paid on the capital goods such as machineries imported or purchased in
the name of any bank or financial institution on hire-purchase loan or
mortgage as if such goods were imported or purchased by the concerned
industry, company etc.
(6) The deduction facility under this Act shall be given only
when a claim is substantiated by documents as prescrib d.
(7) The provision of deduction on paid or payable tax for the
goods to be used in the tax payable transaction remained at the time of
registrations shall be as prescribed.
18. Description of tax to be submitted: (1) Every taxpayer shall, upon
making assessment of the tax payable by him/her in very month, submit
the tax description, as prescribed, to the Tax Officer within Twenty Five
days of completion of that month. Such description shall be submitted
whether or not a taxable transaction was carried out in that month or
not.
(2) Notwithstanding anything contained in Sub-section (1),
taxpayers, as prescribed, may submit a description of a period that is
longer or shorter than one month.
19. Tax Payment: (1) A taxpayer shall pay the 14tax for each tax period
within Twenty Five days of the completion of that period.
13 Inserted by First Amendment. 14 Amended by First Amendment.
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(2) If a taxpayer does not pay the tax within the time limit
specified under Sub-section (1), an extra charge of 15Five percent shall
be imposed on the due tax until the last day of the next month from the
date (month) that the tax first becomes due.
(3) If the tax is not paid even within the time specifi d in Sub-
section (2) another additional of 16Five per cent shall be imposed on the
tax due at that time.
(4) If a taxpayer submits an application to the Director General
for the exemption of the additional charges imposed by 17Sub-section
(2) or (3) stating the reason that the failure to make a timely payment
was caused by extraordinary circumstances beyond the taxpayer's
control (force majeure), the Director General may, if he/she finds the
reason reasonable, exempt such charges.
(5) The charges pursuant to Sub-section (2) and (3), and the
interest pursuant to Section 26, shall be charged from the date on which
the tax first became due.
18(6) In cases where, in assessing the tax of any taxpayer pursuant
to Section 20, it appears that the amount of tax which e/she could get
refunded exceeds the tax recoverable from him/her in that tax period,
additional fee and interest shall not be recovered in assessing his/her tax
in that tax period.
19(7) Tax may also be paid within the time-limit mentio ed in
Sub-section (1) by a cheque guaranteed by a bank (good for payment
cheque). Tax shall be deemed paid on the date of receipt by the Office
of such cheque guaranteed by the bank (good for payment cheque).
15 Amended by First Amendment. 16 Amended by First Amendment. 17 Amended by First Amendment. 18 Inserted by First Amendment. 19 Inserted by First Amendment.
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20(8) No interest shall be charged and collected in interest,
additional fee/charge and fine."
20. Tax Officer May Assess Tax: (1) A Tax Officer may make an
assessment in any of the following circumstances:
(a) If the description of tax is not submitted within the
time limit;
(b) If an incomplete or erroneous tax description is
filed;
(c) If a fraudulent tax description is filed;
(d) If the Tax Officer has a reason to believe that the
amount of tax was understated or otherwise
incorrect.
21(e) If the Tax Officer has a reason to believe that t e
price of supply is under-invoiced.
(2) In assessing the tax pursuant to Sub-section (1), the
assessment may be made on any or the entire following basis:
(a) Proof of transaction;
(b) A tax audit report on transactions submitted by the
concerned Tax Officer;
(c) Tax paid on a similar transaction by another
person.
20 Inserted by First Amendment. 21 Inserted by First Amendment.
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(3) Notwithstanding anything contained in Sub-section (2), the
burden of proof shall lie with the concerned Tax Officer in assessing tax
in accordance with the above provisions.
(4) In assessing the tax pursuant to Sub-section (1), the
assessment shall made within Four years from the earli st date that a tax
description was filed or the tax was due, which occurs earlier. If the
stipulated time expires, the description so filed shall ipso facto be
considered to be true and valid.
(5) In assessing tax pursuant to this Section, the tax officer shall
have to give a period of 22Fifteen days to the concerned person to submit
his/her clarification.
21. Tax Recovery: (1) If the tax due by any taxpayer is not paid within the
specified period, the Tax Officer may, with the pre-approval of the
Director General, collect the tax by using any or all of the following
methods:
(a) By deducting the amount, if any, to be refunded to
the taxpayer;
(b) By seizing movable and immovable property of the
taxpayer;
(c) By selling through auction all or some part of the
taxpayer's assets at a time or in a series of auctions,
as prescribed;
(d) By causing to deduct amounts from the taxpayer's
bank account or other financial institutions;
22 Amended by First Amendment.
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(e) By causing to deduct amounts due to the taxpayer
by Government of Nepal, or a body corporate
owned by Government of Nepal, or local bodies;
(f) By deducting, with the pre-approval of the
taxpayer, the amounts a third party owes to the
taxpayer;
(g) By withholding imports, exports, and other
transactions of the taxpayer.
(2) Notwithstanding anything contained in other places of this
Act, tax assessed under this Act shall not be recovered after Six years
from the date of assessment.
23(3) A sum that is less than One Rupee shall not be counted in
recovering or refunding the tax.
22. Assessment of Tax in a Jeopardy Situation: Notwithstanding
anything contained in other places of this Act, whenever there is a
reason to believe that the recovery of tax is in jeopardy because any
person is about to leave Nepal or to transfer his/her property to anybody
or to remove or conceal assets, a Tax Officer, with the approval of the
Director General, may immediately assess and recover the tax due, or
about to become due.
23. Powers of Inspection and Audit: (1) A Tax Officer may examine, if
there is a reasonable ground to believe that a taxpayer required to be
registered under this Act has been involved in a taxable transaction
without being registered.
23 Inserted by First Amendment.
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(2) In order to examine pursuant to Sub-section (1), verify the tax
return submitted by a registered person under Section 18 and assess the
tax under Section 20, a tax officer shall have the following powers:
(a) To inspect all goods, premises, documents, records
and accounts relating to the liability for tax;
(b) To search the place of transaction of the tax pyer
or other places where the evidence related to an
offence under this Act may be found.
(c) To require, in pursuance of discharging his/her
duty, information from a person who prepares any
records, books, ledger or other documents or makes
entry therein;
(d) To take on possession of, remove and transfer any
documents, books and records from the taxpayer's
transaction place and other transaction places
related thereto; and
(e) To perform audits at the taxpayer's place of
transaction, in the Tax Office, or at any other
appropriate place.
(3) If a Tax Officer requests any person, including a bank or
financial institution for access to any information about taxpayer's
transactions, it shall be the duty of such person t furnish such
information to the Tax Officer.
2423A. Local administration and police to render assitance: In cases
where, in the course of implementing this Act, the Tax Officer seeks
24 Inserted by First Amendment.
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assistance of the local administration, it shall be th duty of the local
administration and police to render such assistance.
2523B. This Act to prevail on tax provision: Notwithstanding anything
contained in the law in force, except in cases where the Financial Act to
be enforced in every year amends this Act and provides for imposition,
assessment, increase, decrease, exemption, or remission of tax, no other
Act shall make any amendment to, or alter tax provisi ns referred to in
this Act or make other tax related provisions.
24. Treatment of Deduction exceeding Tax Liability: (1) If a registered
person's deduction fixed under Section 17 for a month exceeds tax
liability for such month, such excess amount may be adjusted with any
outstanding amount, if any, under this Act.
(2) The remainder of the excess deduction pursuant to Sub-
section (1) may be adjusted with the amount, if any, to be paid for the
next month.
(3) A registered person may submit an application t the Tax
Officer for a lump sum refund, as prescribed, of the amount of the
remaining excess after adjusting for a continuous period of six months
under this Section.
(4) Notwithstanding anything contained in Sub-section (2) and
(3), any registered person, whose export sales for a month are Fifty
percent or more of his/her total sales for that month, and submits an
application following the procedures underlined in this Section for the
refund of the amount pursuant to Section 17, shall be entitled to a
refund of the remaining excess after adjusting any outstanding amount.
25 Inserted by First Amendment.
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(5) On submission of an application pursuant to Sub-section (3)
or (4), the amount eligible for refund shall be paid immediately and if it
is not refunded within Sixty days of the submission f application,
Government of Nepal shall have to provide interest on that amount, as
prescribed.
(6) Where a registered person has submitted an applic tion
claiming for a refund under Sub-section (3) and (4), the amount claimed
shall not be available for adjustment against tax li bility for the next
month.
25. Tax May Be Refunded: (1) The following amounts recovered as tax
shall be refunded if an application for refund is submitted within Three
years from the date of the transaction:
(a) Tax amount paid in Nepal by a diplomat of a
foreign country to Nepal if the foreign country
grants, on reciprocal basis, the tax exemption to
Nepalese diplomats to that country;
(b) Tax amount paid by the international institutions
for which Government of Nepal, Ministry of
Finance, has granted the privileges of tax
exemption;
(c) Tax paid in carrying out a project conducted in
Nepal under a bilateral or multilateral agreement
for which Government of Nepal, Ministry of
Finance, has approved to grant a tax exemption;
(d) Any tax amount recovered by mistake.
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(2) While refunding the tax amount pursuant to Clause (d) of
Sub-section (1), refund shall be made only to that person who bears real
burden of the tax.
26. Interest: (1) If any amount including the tax under this Act is not paid
within the time limit, interest for the period during which such tax
remains unpaid shall be imposed. Such interest shall be imposed even
where a petition is submitted for an appeal under Section 32.
(2) For the purpose of Sub-section (1), Government of Nepal,
Ministry of Finance, shall specify the rate of interest from time to time.
The rate of such interest shall not be less than One Hundred and Twenty
per cent of the average prevailing rate the commercial bank charges.
27. To be treated as Tax: Any fees, interest and penalty to be levied under
this Act shall be treated as a tax payable under this Act.
28. Provision relating to Imports: (1) Except otherwise specified by the
Ministry of Finance, Government of Nepal, the customs officer shall
recover the tax under this Act for goods which are imported.
(2) A customs officer may use the power under this Act or other
prevailing Customs Act to recover tax with respect to goods which are to
be imported.
29. Penalties: 26(1) In cases where any person commits any of the following
offenses, the Tax Officer may impose fines as follows:-
(a) For breach of Sub-sections (1) or (2) of Section 10,
tax payable for each tax period plus Ten Thousand
Rupees.
(b) For breach of Sub-section (5), (6) or (7) of Section
10, One Thousand Rupees for each time of breach.
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(c) For breach of Sub-sections (1) and (4) of Section
14, the amount of tax payable plus Two Thousand
Rupees.
(d) For breach of Section 15, the amount of tax
collected plus cent percent of that amount.
(e) For failure to maintain up-to-date accounts of
transaction pursuant to Sub-section (1) of Section
16, Ten Thousand Rupees and for refusal of
inspection of the books of accounts, Five Thousand
Rupees for each time.
(f) For breach of Sub-section (2) of Section 16, upto
Five Thousand Rupees.
(g) For breach of Sub-section (3) or (4) of Section 16,
Ten Thousand Rupees.
(h) For breach of provision of Section 18, One
Thousand Rupees per tax period or 0.05 percent of
the tax payable per day whichever is higher.
(i) For obstructing to carry out the functions under
Section 23, Five Thousand Rupees for each time of
obstruction.
(j) For under invoicing the sales price Two Thousand
Rupees for each invoice or the fine imposed under
Sub-section (2) whichever is higher.
Provided that, if the office thinks
appropriate, it may purchase or cause to purchase
the goods that are under invoiced, as prescribed.
(k) For breach of Act and Rules made there under Ten
Thousand Rupees, for each time of breach.
26 Amended by First Amendment.
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(2) If a person commits any of the following offencs, a Tax
Officer may impose a fine not exceeding twice the amount of tax or an
imprisonment up to Six months, or penalize with both the fine and the
imprisonment:
(a) Preparing false accounts, invoices or other
documents;
(b) Committing a fraud or an evasion of tax;
(c) If an unregistered person acts as if he/she were a
registered person;
(d) Carrying out a transaction by infringing Section 30.
30. Suspension of Transactions: If a registered person commits twice or
more of any of the offences as mentioned in Section 29, the Director
General may order a Tax Officer to suspend such person's place of
transactions up to Seven days so that transactions are not carried out.
31. Power equal to a Court: For the purpose of this Act, a Tax Officer
may issue a summons, record the statements of persons, receive evidence
and cause to submit documents in the same manner as a court is
empowered.
2731A.Power to assess tax by taking action again: (1) In cases where,
before tax is assessed, it appears from the information received by the
Director General that any action relating to assessm nt of tax is about to
be irregular or has been irregular, the Director General may, by
executing a memorandum clearly setting out the reasons thereof, give
direction to the concerned Tax Officer to assess tax by taking action
again or order to any other officer to carry out that act.
27 Inserted by First Amendment.
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(2) In cases where a taxpayer makes an application, within Thirty
Five days of receipt of the tax assessment order, claiming that tax
liability has increased because of failure of the Tax Officer to observe
any matter required to be observed in assessing tax or irregularity or
recklessness committed by that Officer, and where that matter appears to
be true upon investigation, the Director General may, by executing a
memorandum setting out the reasons thereof, cancel the tax assessment
order and order to reassess tax. In cases where an order is so issued for
reassessment of tax, the Director General has to give information thereof
to the Government of Nepal, Ministry of Finance within Three days.
Provided that, if an appeal has already been made pursuant to
Section 32, the Director General shall not issue an order pursuant to
this Sub-section.
(3) The taxpayer who makes an application pursuant to Sub-
section (2) has to pay undisputed amount of tax, out of the amount of
tax assessed, and furnish a deposit in a sum equal to the amount of tax
in controversy and Fifty percent of the fine or furnish bank guarantee for
such amount.
(4) In cases where the tax liability decreases because of tax
assessment by the Tax Officer with recklessness or ulte ior motive, the
Director General may, within Four years from the date of initial
assessment of tax, give order to amend such tax assessment order.
32. Appeal: An appeal may be filed at the Revenue Tribunal within thirty-
five days against a tax assessment or a penalty order made by the Tax
Office or an order made by the Director General under Section 30.
33. Security To be Deposited: 28In making an appeal to the Revenue
Tribunal pursuant to this Act, one has to pay undisputed amount of tax,
28 Amended by First Amendment.
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out of the amount of tax assessed, and furnish a deposit in a sum equal
to the amount of tax in controversy and Fifty percent of the fine or
furnish a bank guarantee for such amount.
34. Delegation of power: (1) Except the authority of tax assessment and
penalties, a Tax Officer may delegate all or any of the authority
conferred on him/her by this Act to his/her subordinate staff.
(2) No authority specified in this Act to be exercised by the
Director General shall be delegated.
35. Identity Card of Tax Officers: Every Tax Officer shall keep with
him/her an identity card as prescribed and 29the identity card has to be
shown to the concerned person in the course of performing duty.
36. Serving of Notice: Any notice, order or document issued by the
Director General or the Tax Officer shall be considered to have been
served on a taxpayer after the procedure, as prescrib d, has been
completed.
37. Confidentiality: Documents or other information related with tax
received from any person shall not be disclosed or published except in
the following cases:
(a) To inform a revenue collecting officer in connection with
the protection of the revenue of Government of Nepal.
(b) To produce in the court of law as per the law related with
revenue in connection with verifying the liabilities of a tax
payer.
(c) To keep as a part of public record in the proceedings of a
Revenue Tribunal or a court of law.
29 Amended by First Amendment.
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38. Tax Officers to be Punished: If the Director General decides that a
tax assessment was so made maliciously or negligently so that the tax
amount was reduced or increased, he/she shall initiate a Departmental
action against the assessing Tax Officer in accordance with the law
related with his/her conditions of service.
Provided that, a reasonable opportunity shall be giv n to the Tax
Officer to submit his/her clarification.
39. No Responsibility for the act Carried out with Good Faith:
Notwithstanding anything contained in other places of this Act, a Tax
Officer shall not be individually responsible for the act he/she had
carried out in pursuance of discharging his/her duties with good faith.
40. Reward: (1) A person who provides information with evidence showing
that a taxpayer has evaded or attempted to evade all or some portions of
tax shall be awarded as reward the amount equal to Twenty per cent of
the amount of tax recovered on the basis of that information. 30Decision
to award such reward shall be made by the Director General.
(2) If there is more than one informer under Sub-section (1), the
allotment of reward between or among them shall be as determined by
the Director General.
41. Power to Frame Rules: Government of Nepal may frame Rules to
implement the objectives of this Act.
42. Addition and Alteration in the Schedules: Government of Nepal
may make required changes in the schedules by publishing a
Notification in the Nepal Gazette.
30 Inserted by First Amendment.
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43. Prevailing Laws to Prevail in Other: This Act and Rules framed
thereunder shall prevail to the extent of the provisi ns, and in other
cases other prevailing laws shall prevail.
44. Repeal and saving: (1) The following Acts are, hereby, repealed:
(a) Sales Tax Act, 2023 (1967)
(b) Hotel Tax Act, 2018 (1962)
(c) Contract Tax Act, 2023 (1967)
(d) Entertainment Act, 2016 (1960)
(2) The acts and proceedings carried out under the ep aled Acts
pursuant to Sub-section (1) shall be deemed to havebeen carried out
under this Act.
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31Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice, wheat, maize, barley, millet, buckwheat, pulses,
flour and rye flour, grains, paddy flakes, peas, beans, chickpeas
and kidney peas and similar basic unprocessed food materials and
their extracts.
(b) Green and fresh vegetables, fresh fruits, fresh eggs and fresh and
unprocessed agricultural products to be used as fruit , vegetables
and raw vegetables (except those to be supplied by hotel,
restaurant, bar, guest house, cafeteria or other similar institution).
(c) Unprocessed cash crops (like sugarcane, cotton, cardamom, jute,
unprocessed tobacco to be sold by the farmer, tea-leaf, granular
coffee, oil seeds (soybean, ground-nuts, granular of yellow
flowers, sun-flower, linseed and similar kinds of other basic
agricultural products to be used in the production of edible oil)
and solid remaining thereof.
(d) Herbs.
Group 2. Goods of Basic Needs:
(a) Edible oil (produced manually by local oil mills only).
(b) Drinking water to be supplied openly through taps and tankers.
(c) Fire wood and Coal.
31 Amended by Notice published in Nepal Gazette dated in 2054.5.2 (15 Aug. 1997).
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(d) Kerosene (except air fuel).
(e) Salt.
Group 3. Live Animals and their products:
(a) He-goat, sheep, yak, he buffalo, bore, pigs, rabbit and similar
other animals; their fresh milk and unprocessed and u cooked,
varieties.
(b) Cow, she buffalo and she goat.
(c) Ducks, hens, cocks, turkey and similar other birds, their fresh
meat, eggs and unprocessed and uncooked varieties.
(d) Fresh or dried fish (other than packed).
Group 4. Agricultural inputs:
(a) Seeds of plants as mentioned in group 1.
(b) Manure, fertilizer and soil conditioners.
(c) General tools to be used in agriculture acts (hand tools to dig and
clear the land, hand tools to cut wood and grasses except hand
file, tools to be used for thrashing granular, tools for cutting
grasses for animal and tool to be used in ploughing share).
(d) Pesticides to be used mainly or absolutely in crops.
Group 5. Medicine, Medical cure and Similar Health services:
(a) Services provided by operation conducting hospitals, clinics and
health institutions to provide medical treatment conducted with
the approval of government of Nepal.
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(b) Professional services to be provided on institutional or personnel
basis by health workers (doctor, nurse, vaidya, kaviraj,
compounder etc.).
(c) Goods to be supplied to the recipient necessary in the process of
making available the service as mentioned in Clause (a) and (b)
above.
(d) Human blood and products derived from human blood.
(e) Human or animal organs or tissue to be used in medical research.
(f) Professional services to be provided by veterinary surgeons and
veterinary doctors.
(g) Medicine for the treatment of human being and anim ls and
means of family planning.
(h) Means made or suitable only for the use of disabled persons.
(i) Oxygen gas to be used in the treatment and X-ray films.
(j) Raw-materials, for the production of medicine, imported or
purchased by the medical industry own-self or prescribed by the
Department of Drug management in the prescribed limit.
Group 6: Education:
(a) Acts relating to research in a school or university.
(b) Vocational or refresher trainings without having profit making
objectives.
(c) Goods to be supplied to the recipient as being necessary in the
process of making available service and educational service to be
provided by schools and universities.
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Group 7: Books, news papers, printed materials and printing and
publishing:
(a) Books, booklets and pamphlets.
(b) News paper, journals and periodicals.
(c) Pictures and maps.
(d) Cover, envelopes and boxes used in supplying the goods as
mentioned in Clause (a) to (c) (if not separately charged for
them).
(e) Printing and publishing.
(f) News prints.
Group 8: Artistic, cultural and carving services:
(a) Artistic and carving services (fine art, sculpt re, architecture and
similar kinds of other arts and services relating thereto.)
(b) Cultural programmes.
(c) Entry fee of library, museum, art gallery, zoo and botanical
garden.
(d) Demonstration of Nepali moves produced in the native land.
Group 9: Passenger transportation and transportation services:
Public passenger transportation and transportation services.
Group 10: Business or Professional services:
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Professional services to be rendered institutionally or personally
by lawyers, auditors, engineers, artists, sportsmen, writers,
designers, insurers, translators, interpreters etc.
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Group 11: Other goods and services:
(1) Postal services (only conducted by the Government of Nepal)
(a) Service relating to transportation or handing over of
letters, money and postal packets.
(b) Other services to be necessary for the transportati n or
handing over of letters, money and postal packets.
(c) Postage stamps.
(2) Financial and insurance services.
(3) Bank note and cheque book.
(a) Printing and issuance of bank notes.
(b) Supply of notes into the Nepal from outside of the Nepal.
(c) Cheque book.
(4) Gold and silver.
(a) Gold and gold coins (other than ornaments and goods
made of gold).
(b) Silver and silver coins (other than ornaments and goods
made of silver).
(5) Electricity.
(6) Scrip of copper and brass.
(7) Raw wool.
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Group 12: Building and Land:
Transaction of house and land and rental thereof (except service
to be rendered by the institution conducted professionally as
hotel, guest houses).
Group 13: Gambling, casino and lottery:
(1) Activities relating to facility to be provided for gambling.
(2) Lottery.














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32Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. 33...........
2. Goods to be exported out of Nepal: If it has been proved that the
goods had been supplied in the following manner:
(a) Goods exported outside Nepal, or
(b) Goods put on the flight to be flown from the Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
3. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
4. Goods or services imported by a person enjoying diplomatic facility.
32 Amended by Notice published in Nepal Gazette dated in 2054.5.2 (15 Aug. 1997). 33 Deleted by Some Nepal Laws Amendment Act, 2063. Note : The words "His majesty's" has been changed into "Government of Nepal" by some Nepal law amending
Act,2063 :
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Financial Ordinance, 2059 (2002)
Date of Authentication and Publication
2059.3.24 (8 July 2002)
Ordinance number 2 of the year 2059
An Ordinance Made to Implement Proposals Relating to Finance of
the Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal and at the moment Parliament is not in
session;
Now, therefore, be it enacted by His Majesty the King Gyanendra Bir
Bikram Shah Dev, in accordance Articles 72 of Constitution Kingdom of
Nepal, 2047(1990).
1. Short title and commencement: (1) This Act may be called as the
“Financial Ordinance, 2059 (2002)."
(2) This ordinance come into force immediately.
20. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) The following Clause (t) shall be substituted for Clause (t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax
Officer and the Chief Tax Administrator appointed
by the Government of Nepal for the purpose of this
Act, and this term includes a section office, director
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and deputy director at the Department or such
other officer designated by the Government of
Nepal authorizing to exercise the powers of Tax
Officer under this Act.”
(2) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of Ten percent.”
(3) The following Clause (d1) shall be inserted after Clause (d) of
Sub-section (1) of Section 11:
“(d1) If the taxpayer is one who gives zero return or
does not give return at all within a consecutive
period of One year,”
(4) The following Section 12A. Shall be inserted after Section 12:
“12A. Taxable value of timber transaction: (1) There shall be
levied and collected tax on the amount of royalty of the
timber of national forest, added cent percent in amount of
royalty, at the time of auction, release or saw order,
whichever is earlier.
(2) If the timber of a personal cultivated, private
forest or community forest for business purpose and
despite that royalty is not chargeable, tax shall be eviable
as if it were the timber of national forest.”
(3) Notwithstanding anything contained in Sub-
section (1) and (2) where the sum of royalty amount and
cent percent of royalty amount happens lower than the
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price of auction sale, tax shall be imposed on the auction
sale amount.
(4) A registered person may offset tax paid under
Sub-section (1), (2) and (3).
(5) Of Section 14,-
(a) The following proviso shall be inserted in Sub-section (1):
“Provided that, a person who carries on annual
transaction of more than One Million Rupees shall issue
invoices with serial number and permanent accounts
number as well as his or her name, and address despite
that he or she is not registered.”
(b) The following Sub-sections (4) shall be inserted after Sub-
section (3):
“(4) A person who purchases goods or service worth
more than Ten Thousand Rupees for commercial purpose
is required to take an invoice from the registered p rson.
The invoice shall be kept with while transporting such
goods.”
(6) The words “or by registered post” shall be inserted after the
words “before the Tax Officer” contained in Sub-section (1) of
Section 18,-
(7) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 25:
“(1a) Notwithstanding anything contained in Sub-section
(1), a diplomatic body or person on the purchase of taxable
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goods or services shall not be refunded if the amount p rchase is
less than One Thousand Five Hundred Rupees at one time.”
(8) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of interest
shall be Fifteen per cent per annum.”
(9) The following Clause (c) shall be substituted for Clause (c) of Sub-
section (1) of Section 29:
“(c) In the event of violation of Sub-sections (1) and (4) of
Section 14, Five Thousand Rupees for each instance fine
including recover the liable tax.”
(10) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of Nepal may
obtain the service of the concerned expert for the act related to
tax auditing; and the provision on governmental secrecy
mentioned in Section 37 shall also apply to such an expert.”
(11) The following Schedule-1 and Schedule-2 shall be substituted for
Schedule-1 and Schedule-2:
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“ Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice, wheat, maize, barley, millet, buckwheat, pulses,
flour, rye flour, grains, peas, chickpeas, kidney p as, beans and
similar basic unprocessed food materials and their extracts,
(b) Green and fresh vegetable, fresh fruits, fresh eggs, tuberous roots,
and fruits, vegetables and as use in vegetable and tuberous roots,
fresh and unprocessed agro-products. (Except those t be
supplied hotels, restaurants, bars, guest houses, cafeteria and
other similar organizations)
(c) Unprocessed cash crops/cereals (such as sugarcane, cotton,
cardamom, ginger and saffron, flax, unprocessed tobacco, tea leaf
sold by farmers, proved orthodox tea producing using biological
fertilizer, coffee, soybean, ground-nuts, rape-seed, mustard seed,
sarsyuko geda, sunflower, sesamum seed) and oil-cake.
(d) Herbs (including their extracts)
Group 2. Goods of Basic Needs:
(a) Unprocessed mustard oil.
(b) Piped water, including water supplied by tankers.
(c) Wood and coal.
(d) Kerosene (Except fuel of aircraft).
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(e) Salt.
Group 3. Live Animals and animal products
(a) Goats, sheep and mountain goats, yak and buffalos, bore and
pigs, rabbit and other such animal and their unprocessed raw
edible food items .
(b) Cows and she buffalos, she goats, and their fresh milk, (including
pasteurized), Fresh curd, bees and bee hives.
(c) Ducks, hens, cocks, turkey and similar other birds their fresh
meat and unprocessed raw items and eggs.
(d) Fresh or dried fish (except other than packed).
4. Agricultural inputs
(a) Seeds of any crops and plants as mentioned in group One.
(b) Manure, fertilizer and soil conditioners.
(c) Tools used in agriculture : Hand tools, mattocks, picks, forks
and rakes, axes, bill hooks and similar hewing tools, secateurs of
any kind, scythes, sickles, hay knives, other than d saws,
hedge shears, timber wedges, ploughshare and other tools of a
kind used in agriculture.
(d) Insecticides, fully or partially used only for crops.
(e) Use in agriculture function Tractors, cultivators, tantalum,
levelers, harvesting or threshing machine, threshers, fishing nets,
to Eight horse power up to pumping sets and up to 30 meters
hose pipe.
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(f) Utensils for feeding poultry feed, box for chicken (challa), and
crate for keeping egg.
(g) Feed and ingredient of feed supplements.
Group 5. Medicine, Medical and Similar Health services
(a) Medical or surgical services provided by health institution
operated in Government ownership.
(b) Human blood and human blood items and vaccines.
(c) Human or animal organs or tissue for medical research.
(d) Medicaments for treatment of livestock and human beings and
family planning means.
(e) Goods made for, and suitable only for the use of, infirm and
disabled persons.
(f) X-ray film and oxygen gas to be used for treatment and.
(g) Raw material purchased or imported by the medicine industries
to the extent approved by the Department of Drug Management.
Group 6: Education
(a) Research related acts in schools or universities.
(b) Getting purpose for non-profit, Vocational or professional
trainings or refresher trainings.
(c) Educational services provided by schools and universities.
Group 7: Books, newspapers and printed materials
(a) Books, newsletters and periodicals publications.
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(b) Newsprint.
Group 8: Artistic and cultural goods and services, carving services
(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programs.
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
Group 9: Passengers and goods transportation services
Air transport, non tourist passenger transportation (except cabal car)
and goods carrier service (except transportation related to supply).
Group 10: Personal or Professional service:
Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually.
Group 11: Other goods or services:
1. Postal services (only those provided by the Governm nt of
Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets.
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packets.
(c) Postage stamps.
2. Financial and insurance services.
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3. Bank notes and cheque books:
(a) Printing and issue of bank notes.
(b) Supply of bank notes from foreign countries into Nepal.
(c) Cheque books.

4. Gold and silver:
(a) Gold, gold coins and gold ornaments.
(b) Silver, silver coins (Except others silver ready-made goods
and ornaments).
5. Electricity.
6. Raw wool.
7. Battery operated tempo and their chassis and Battery.
8. Bio-gas, solar power and wind power operated machine and
equipments recommended by Alternate Energy Center.
9. Aircrafts, helicopters, fire engine (Damcal), ambulances.
10. Jute products.
11. Industries and machine up to 5 percent customs duty as falling
under Part 84 of the Customs Tariff.
12. Woolen carpet and woolen carpet weaving, dying, washing and
knitting.
13. Cotton sari, Lungi, Dhoti (for both men and women), Gamcha
and cotton yarn.
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14. Cotton thread.
15. Woolen yarn used in domestic hand kittening of sweater (except
artificial and acrylic.
16. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
17. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
18. The value added tax collected by textile or match (only wooden
stick) industries and the domestic industries producing rod and
ingot using cent percent domestic iron scrap in their value
addition shall be refunded to those industries as pre cribed by
Government of Nepal.
Provided that, using cent percent domestic iron scrap
industry shall be refunded only Fifty percent from wn collected
tax.
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the
services provided by such entities carrying on business such as
hotels and guest houses).
Group 13: Betting, casinos and lotteries
Activities relating to facilities provided for the organization of
bets or gambling, and lottery.
Note:
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The Department, as prescribed, and in consultation w th the Department
of Customs, interpretation of the goods and services enjoying tax
emption and the Harmonized Code of Commodities as necessary.

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Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. Goods and services purchased or imported by His Majesty the King, His
Majesty the Queen, His Royal Highness the Crown Price and other
members of the Royal family.
2. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
3. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
4. Goods or services imported by a person enjoying diplomatic facility.
5. Zero rate facility shall be available to medicine dustries if the industry
desires for such a facility.
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6. If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
shall be provided on such supplies, so long as suchtreaty or agreement
is in effect.”
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Financial Ordinance, 2059 (2003)
Date of Authentication and the Publication
2059.9.22 (6 January 2003)
Ordinance number 8 of the year 2059
An Ordinance Made to Implement Proposals Relating to Finance of
the Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal and at the moment Parliament is not in
session;
Now, therefore, be it enacted by His Majesty the King Gyanendra Bir
Bikram Shah Dev, in accordance with Articles 72 of C nstitution kingdom
of Nepal, 2047(1990).
1. Short title and commencement: (1) This Act may be called as the
“Financial Ordinance, 2059 (2003)."
(2) This ordinance come into force immediately.
20. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) The following Clause (t) shall be substituted for Clause (t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax Officer and
the Chief Tax Administrator appointed by the Governme t
of Nepal for the purpose of this Act, and this term includes
a section office, director and deputy director at the
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Department or such other officer designated by the
Government of Nepal authorizing to exercise the powers of
Tax Officer under this Act.”
(2) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of Ten percent.”
(3) The following Clause (d1) shall be inserted after Clause (d) of
Sub-section (1) of Section 11:
“(d1) If the taxpayer is one who gives zero return o does not
give return at all within a consecutive period of One
year,”
(4) The following Section 12A. Shall be inserted after Section 12:
“12A. Taxable value of timber transaction: (1) There shall be
levied and collected tax on the amount of royalty of the
timber of national forest, added cent percent in amount of
royalty, at the time of auction, release or saw order,
whichever is earlier.
(2) If the timber of a personal cultivated, private
forest or community forest for business purpose and
despite that royalty is not chargeable, tax shall be eviable
as if it were the timber of national forest.”
(3) Notwithstanding anything contained in Sub-
section (1) and (2) where the sum of royalty amount and
cent percent of royalty amount happens lower than the
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price of auction sale, tax shall be imposed on the auction
sale amount.
(4) A registered person may offset tax paid under
Sub-section (1), (2) and (3).
(5) Of Section 14,-
(a) The following proviso shall be inserted in Sub-section (1):
“Provided that, a person who carries on annual
transaction of more than One Million Rupees shall issue
invoices with serial number and permanent accounts
number as well as his or her name, and address despite
that he or she is not registered.”
(b) The following Sub-sections (4) shall be inserted after Sub-
section (3):
“(4) A person who purchases goods or service worth
more than Ten Thousand Rupees for commercial purpose
is required to take an invoice from the registered p rson.
The invoice shall be kept with while transporting such
goods.”
(6) Of Section 18,-
(a) The words “or by registered post” shall be inserted after
the words “before the Tax Officer” contained in Sub-
section (1).
(b) The following Sub-sections (1a) shall be inserted after
Sub-section (1):
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53 www.lacommission.gov.np
“(1a) Notwithstanding anything contained in Sub-
section (1), a taxpayer for every month in a district where
there is no Inland Revenue Office may furnish the amount
of tax returns to be paid and submitted by him/her with
the Office of Funds and Accounts Controller of the same
district within the Fifteenth day of the month in which
he/she has to furnish the tax returns paying the tax. The
Office of Funds and Accounts Controller shall forwad the
returns of tax and payment of tax so received to the Inland
Revenue Office within Seven days.”
(7) The following proviso shall be inserted in Sub-section (1) of
Section 19,-
Provided that, a taxpayer, who submits tax details in the
Financial Comptroller Office pursuant to Sub-section (1a) of
Section 18, shall submit tax details of each tax duration to such
office within Fifteen days of the expiry of such period.
(8) The following Sub-sections (2a) shall be inserted after Sub-
section (2) of Section 23:
“(2a) If it is found from the inquiry carried out by the tax
officer to the place of transaction of a tax payer pu suant to Sub-
section (2) that bills are issued by showing unnatural (not real)
lower sale price or under invoiced price than the pr vailing
market price of any goods, notwithstanding anything contained
elsewhere in the prevailing laws, such an officer shall hold the
sale of the remaining such type of goods in the stock and the
Inland Revenue Department or Inland Revenue Office may
purchased or cause to purchase in the under invoice pri so sold
by the taxpayer. ”
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(9) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 25:
“(1a) Notwithstanding anything contained in Sub-section
(1), a diplomatic body or person on the purchase of taxable
goods or services shall not be refunded if the amount p rchase is
less than One Thousand Five Hundred Rupees at one time.”
(10) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of
interest shall be Fifteen per cent per annum.”
(11) The following Clause (c) shall be substituted for Clause (c) of
Sub-section (1) of Section 29:
“(c) In the event of violation of Sub-sections (1) and
(4) of Section 14, Five Thousand Rupees for each
instance fine including recover the liable tax.”
(12) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of
Nepal may obtain the service of the concerned expert for
the act related to tax auditing; and the provision
governmental secrecy mentioned in Section 37 shall also
apply to such an expert.”
(35) The following Schedule-1 and Schedule-2 shall be substituted
for Schedule-1 and Schedule-2:
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“ Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice, wheat, maize, barley, millet, buckwheat, pulses,
flour, rye flour, grains, peas, chickpeas, kidney p as, beans and
similar basic unprocessed food materials and their extracts,
(b) Green and fresh vegetable, fresh fruits, fresh eggs, tuberous roots,
and fruits, vegetables and as use in vegetable and tuberous roots,
fresh and unprocessed agro-products. (Except those t be
supplied hotels, restaurants, bars, guest houses, cafeteria and
other similar organizations)
(c) Unprocessed cash crops/cereals (such as sugarcane, cotton,
cardamom, ginger and saffron, flax, unprocessed tobacco, tea leaf
sold by farmers, proved orthodox tea producing using biological
fertilizer, coffee, soybean, ground-nuts, rape-seed, mustard seed,
sarsyuko geda, sunflower, sesamum seed) and oil-cake.
(d) Herbs (including their extracts)
Group 2. Goods of Basic Needs:
(a) Unprocessed mustard oil.
(b) Piped water, including water supplied by tankers.
(c) Wood and coal.
(d) Kerosene (Except fuel of aircraft).
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(e) Salt.
Group 3. Live Animals and animal products
(a) Goats, sheep and mountain goats, yak and buffalos, bore and
pigs, rabbit and other such animal and their unprocessed raw
edible food items.
(b) Cows and she buffalos, she goats, and their fresh milk, (including
pasteurized), Fresh curd, bees and bee hives.
(c) Ducks, hens, cocks, turkey and similar other birds their fresh
meat and unprocessed raw items and eggs.
(d) Fresh or dried fish (except other than packed).
4. Agricultural inputs
(a) Seeds of any crops and plants as mentioned in group One.
(b) Manure, fertilizer and soil conditioners.
(c) Tools used in agriculture : Hand tools, mattocks, picks, forks
and rakes, axes, bill hooks and similar hewing tools, secateurs of
any kind, scythes, sickles, hay knives, other than d saws,
hedge shears, timber wedges, ploughshare and other tools of a
kind used in agriculture.
(d) Insecticides, fully or partially used only for crops.
(e) Use in agriculture function Tractors, cultivators, tantalum,
levelers, harvesting or threshing machine, threshers, fishing nets,
to Eight horse power up to pumping sets and up to 30 meters
hose pipe.
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(f) Utensils for feeding poultry feed, box for chicken (challa), and
crate for keeping egg.
(g) Feed and ingredient of feed supplements.
Group 5. Medicine, Medical and Similar Health services
(a) Medical or surgical services provided by health institution
operated in Government ownership.
(b) Human blood and human blood items and vaccines.
(c) Human or animal organs or tissue for medical research.
(d) Medicaments for treatment of livestock and human beings and
family planning means.
(e) Goods made for, and suitable only for the use of, infirm and
disabled persons.
(f) X-ray film and oxygen gas to be used for treatment and.
(g) Raw material purchased or imported by the medicine industries
to the extent approved by the Department of Drug Management.
Group 6: Education
(a) Research related acts in schools or universities.
(b) Getting purpose for non-profit, Vocational or professional
trainings or refresher trainings.
(c) Educational services provided by schools and uiversities.
Group 7: Books, newspapers and printed materials
(a) Books, newsletters and periodicals publications.
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(b) Newsprint.
Group 8: Artistic and cultural goods and services, carving services
(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programs.
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
Group 9: Passengers and goods transportation services
Air transport, non tourist passenger transportation (except cabal car)
and goods carrier service (except transportation related to supply).
Group 10: Personal or Professional service:
Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually.
Group 11: Other goods or services:
1. Postal services (only those provided by the Governm nt of
Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets.
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packets.
(c) Postage stamps.
2. Financial and insurance services.
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3. Bank notes and cheque books:
(a) Printing and issue of bank notes.
(b) Supply of bank notes from foreign countries into Nepal.
(c) Cheque books.

4. Gold and silver:
(a) Gold, gold coins and gold ornaments.
(b) Silver, silver coins (Except others silver ready-made goods
and ornaments).
5. Electricity.
6. Raw wool.
7. Battery operated tempo and their chassis and Battery.
8. Bio-gas, solar power and wind power operated machine and
equipments recommended by Alternate Energy Center.
9. Aircrafts, helicopters, fire engine (Damcal), ambulances.
10. Jute products.
11. Industries and machine up to Five percent customs duty as falling
under Part 84 of the Customs Tariff.
12. Woolen carpet and woolen carpet weaving, dying, washing and
knitting.
13. Cotton sari, Lungi, Dhoti (for both men and women), Gamcha
and cotton yarn.
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14. Cotton thread.
15. Woolen yarn used in domestic hand kittening of sweater (except
artificial and acrylic.
16. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
17. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
18. The value added tax collected by textile or match (only wooden
stick) industries and the domestic industries producing rod and
ingot using cent percent domestic iron scrap in their value
addition shall be refunded to those industries as pre cribed by
Government of Nepal.
Provided that, using cent percent domestic iron scrap
industry shall be refunded only Fifty percent from wn collected
tax.
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the
services provided by such entities carrying on business such as
hotels and guest houses).
Group 13: Betting, casinos and lotteries
Activities relating to facilities provided for the organization of
bets or gambling, and lottery.
Note:
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The Department, as prescribed, and in consultation w th the Department
of Customs, interpretation of the goods and services enjoying tax
emption and the Harmonized Code of Commodities as necessary.

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Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. Goods and services purchased or imported by His Majesty the King, His
Majesty the Queen, His Royal Highness the Crown Price and other
members of the Royal family.
2. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
3. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
4. Goods or services imported by a person enjoying diplomatic facility.
5. Zero rate facility shall be available to medicine dustries if the industry
desires for such a facility.
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6. If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
shall be provided on such supplies, so long as suchtreaty or agreement
is in effect.
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Financial Ordinance, 2060 (2003)
Date of Authentication and Publication
2060.3.16 (1 July 2003)
Ordinance number 3 of the year 2060
An Ordinance Made to Implement Proposals Relating to Finance of
the Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal and at the moment Parliament is not in
session;
Now, therefore, be it enacted by His Majesty the King Gyanendra Bir
Bikram Shah Dev, in accordance with Articles 72 of Cnstitution kingdom of
Nepal, 2047(1990).
1. Short title and commencement: (1) This Act may be called as the
“Financial Ordinance, 2060 (2003)."
(2) This ordinance come into force immediately.
(3) This ordinance shall prevail till the last day of Ashad, 2060
B.S.
20. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) The following Clause (t) shall be substituted for Clause (t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax
Officer and the Chief Tax Administrator appointed
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by the Government of Nepal for the purpose of this
Act, and this term includes a section office, director
and deputy director at the Department or such
other officer designated by the Government of
Nepal authorizing to exercise the powers of Tax
Officer under this Act.”
(2) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of Ten percent.”
(3) The following Clause (d1) shall be inserted after Clause (d) of
Sub-section (1) of Section 11:
“(d1) If the taxpayer is one who gives zero return or
does not give return at all within a consecutive
period of One year,”
(4) The following Section 12A. Shall be inserted after Section 12:
“12A. Taxable value of timber transaction: (1) There shall be
levied and collected tax on the amount of royalty of the
timber of national forest or the amount of auction,
whichever is higher, at the time of auction, release or saw
order, whichever is earlier.
(2) If the timber of a personal cultivated, private
forest or community forest for business purpose and
despite that royalty is not chargeable, tax shall be eviable
as if it were the timber of national forest.”
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(3) Notwithstanding anything contained in Sub-
section (1) and (2) where the sum of royalty amount and
cent percent of royalty amount happens lower than the
price of auction sale, tax shall be imposed on the auction
sale amount.
(4) A registered person may offset tax paid under
Sub-section (1), (2) and (3).”
(5) Of Section 14,-
(a) The following proviso shall be inserted in Sub-section (1):
“Provided that, a person who carries on annual
transaction of more than One Million Rupees shall issue
invoices with serial number and permanent accounts
number as well as his or her name, and address despite
that he or she is not registered.”
(b) The following Sub-sections (4) and (5) shall be inserted
after Sub-section (3):
“(4) A person who purchases goods or service worth
more than Ten Thousand Rupees for commercial purpose
is required to take an invoice from the registered p rson.
The invoice shall be kept with while transporting such
goods.”
(6) Of Section 18,-
(a) The words “or by registered post” shall be inserted after
the words “before the Tax Officer” contained in Sub-
section (1).
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(b) The following Sub-sections (1a) shall be inserted after
Sub-section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), a taxpayer in a district where there is no
Inland Revenue Office may furnish the amount of tax
returns to be paid and submitted by him/her with the
Office of Funds and Accounts Controller of the same
district within the Fifteenth day of the month in which
he/she has to furnish the tax returns paying the tax. The
Office of Funds and Accounts Controller shall forwad the
returns of tax and payment of tax so received to the Inland
Revenue Office within Seven days.”
(7) The following proviso shall be inserted in Sub-section (1) of
Section 19,-
Provided that, a taxpayer, who submits tax details in the
Financial Comptroller Office pursuant to Sub-section (1a) of
Section 18, shall submit tax details of each tax duration to such
office within Fifteen days of the expiry of such period.
(8) The following Sub-sections (2a) shall be inserted after Sub-
section (2) of Section 23:
(2a) If it is found from the inquiry carried out by the tax
officer to the place of transaction of a tax payer pu suant to Sub-
section (2) that bills are issued by showing unnatural (not real)
lower sale price or under invoiced price than the pr vailing
market price of any goods, notwithstanding anything contained
elsewhere in the prevailing laws, such an officer shall hold the
sale of the remaining such type of goods in the stock and the
Inland Revenue Department or Inland Revenue Office may
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purchased or cause to purchase in the under invoice pri so sold
by the taxpayer.
(9) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 25:
“(1a) Notwithstanding anything contained in Sub-section
(1), a diplomatic body or diplomat on the purchase of taxable
goods or services shall not be refunded if the amount p rchase is
less than One Thousand Five Hundred Rupees at one time.”
(10) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of interest
shall be Fifteen per cent per annum.”
(11) The following Clause (c) shall be substituted for Clause (c) of
Sub-section (1) of Section 29:
“(c) In the event of violation of Sub-sections (1) and (4)
of Section 14, Five Thousand Rupees for each
instance fine including recover the liable tax.”
(12) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of
Nepal may obtain the service of the concerned expert for
the act related to tax auditing; and the provision
governmental secrecy mentioned in Section 37 shall also
apply to such an expert.”
(20) The following Schedule-1 and Schedule-2 shall be substituted
for Schedule-1 and Schedule-2:
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Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice, wheat, maize, barley, millet, buckwheat, pulses,
flour, rye flour, grains, peas, chickpeas, kidney p as, beans and
similar basic unprocessed food materials and their extracts,
(b) Green and fresh vegetable, fresh fruits, fresh eggs, tuberous roots,
and fruits, vegetables and as use in vegetable and tuberous roots,
fresh and unprocessed agro-products. (Except those t be
supplied hotels, restaurants, bars, guest houses, cafeteria and
other similar organizations)
(c) Unprocessed cash crops/cereals (such as sugarcane, cotton,
cardamom, ginger and saffron, flax, unprocessed tobacco, tea leaf
sold by farmers, proved orthodox tea producing using biological
fertilizer, coffee, soybean, ground-nuts, rape-seed, mustard seed,
sarsyuko geda, sunflower, sesamum seed) and oil-cake.
(d) Herbs (including their extracts)
Group 2. Goods of Basic Needs:
(a) Unprocessed mustard oil.
(b) Piped water, including water supplied by tankers.
(c) Wood and coal.
(d) Kerosene (Except fuel of aircraft).
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(e) Salt.
Group 3. Live Animals and animal products
(a) Goats, sheep and mountain goats, yak and buffalos, bore and
pigs, rabbit and other such animal and their unprocessed raw
edible food items.
(b) Cows and she buffalos, she goats, and their fresh milk, (including
pasteurized), Fresh curd, bees and bee hives.
(c) Ducks, hens, cocks, turkey and similar other birds their fresh
meat and unprocessed raw items and eggs.
(d) Fresh or dried fish (except other than packed).
4. Agricultural inputs
(a) Seeds of any crops and plants as mentioned in group One.
(b) Manure, fertilizer and soil conditioners.
(c) Tools used in agriculture : Hand tools, mattocks, picks, forks
and rakes, axes, bill hooks and similar hewing tools, secateurs of
any kind, scythes, sickles, hay knives, other than d saws,
hedge shears, timber wedges, ploughshare and other tools of a
kind used in agriculture.
(d) Insecticides, fully or partially used only for crops.
(e) Use in agriculture function Tractors, cultivators, tantalum,
levelers, harvesting or threshing machine, threshers, fishing nets,
to Eight horse power up to pumping sets and up to 30 meters
hose pipe.
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(f) Utensils for feeding poultry feed, box for chicken (challa), and
crate for keeping egg.
(g) Feed and ingredient of feed supplements.
Group 5. Medicine, Medical and Similar Health services
(a) Medical or surgical services provided by health institution
operated in Government ownership.
(b) Human blood and human blood items and vaccines.
(c) Human or animal organs or tissue for medical research.
(d) Medicaments for treatment of livestock and human beings and
family planning means.
(e) Goods made for, and suitable only for the use of, infirm and
disabled persons.
(f) X-ray film and oxygen gas to be used for treatment, and
(g) Raw material purchased or imported by the medicine industries
to the extent approved by the Department of Drug Management.
Group 6: Education
(a) Research related acts in schools or universities.
(b) Getting purpose for non-profit, Vocational or professional
trainings or refresher trainings.
(c) Educational services provided by schools and universities.
Group 7: Books, newspapers and printed materials
(a) Books, newsletters and periodicals publications.
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(b) Newsprint.
Group 8: Artistic and cultural goods and services, carving services
(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programs.
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
Group 9: Passengers and goods transportation services
Air transport, non tourist passenger transportation (except cabal car)
and goods carrier service (except transportation related to supply).
Group 10: Personal or Professional service:
Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually.
Group 11: Other goods or services:
1. Postal services (only those provided by the Governm nt of
Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets.
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packets.
(c) Postage stamps.
2. Financial and insurance services.
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3. Bank notes and cheque books:
(a) Printing and issue of bank notes.
(b) Supply of bank notes from foreign countries into Nepal.
(c) Cheque books.

4. Gold and silver:
(a) Gold, gold coins and gold ornaments.
(b) Silver, silver coins (Except others silver ready-made goods
and ornaments).
5. Electricity.
6. Raw wool.
7. Battery operated tempo and their chassis and Battery.
8. Bio-gas, solar power and wind power operated machine and
equipments recommended by Alternate Energy Center.
9. Aircrafts, helicopters, fire engine (Damcal), ambulances.
10. Jute products.
11. Industries and machine up to 5 percent customs duty as falling
under Part 84 of the Customs Tariff.
12. Woolen carpet and woolen carpet weaving, dying, washing and
knitting.
13. Cotton sari, Lungi, Dhoti (for both men and women), Gamcha
and cotton yarn.
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14. Cotton thread.
15. Woolen yarn used in domestic hand kittening of sweater (except
artificial and acrylic.
16. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
17. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
18. The value added tax collected by textile or match (only wooden
stick) industries and the domestic industries producing rod and
ingot using cent percent domestic iron scrap in their value
addition shall be refunded to those industries as pre cribed by
Government of Nepal.
Provided that, using cent percent domestic iron scrap
industry shall be refunded only Fifty percent from wn collected
tax.
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the
services provided by such entities carrying on business such as
hotels and guest houses).
Group 13: Betting, casinos and lotteries
Activities relating to facilities provided for the organization of
bets or gambling, and lottery.
Note:
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The Department, as prescribed, and in consultation w th the Department
of Customs, interpretation of the goods and services enjoying tax
emption and the Harmonized Code of Commodities as necessary.
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Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. Goods and services purchased or imported by His Majesty the King, His
Majesty the Queen, His Royal Highness the Crown Price and other
members of the Royal family.
2. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
3. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
4. Goods or services imported by a person enjoying diplomatic facility.
5. Zero rate facility shall be available to medicine dustries if the industry
desires for such a facility.
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6. If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
shall be provided on such supplies, so long as suchtreaty or agreement
is in effect.
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Financial Ordinance, 2060 (2003)
Date of Authentication and Publication
2060.4.1(17 July 2003)
Ordinance number 7 of the year 2060
An Ordinance Made to Implement Proposals Relating to Finance of the
Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal and at the moment Parliament is not in
session;
Now, therefore, be it enacted by His Majesty the King Gyanendra Bir
Bikram Shah Dev, in accordance with Articles 72 of Cnstitution kingdom of
Nepal, 2047(1990).
1. Short title and commencement: (1) This Act may be called as the
“Financial Ordinance, 2060 (2003)."
(2) This ordinance come into force immediately.
22. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) The following Clause (t) shall be substituted for Clause (t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax
Officer and the Chief Tax Administrator appointed
by the Government of Nepal for the purpose of this
Act, and this term includes a section office, director
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and deputy director at the Department or such
other officer designated by the Government of
Nepal authorizing to exercise the powers of Tax
Officer under this Act.”
(2) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of Ten percent.”
(3) The following Clause (d1) shall be inserted after Clause (d) of
Sub-section (1) of Section 11:
“(d1) If the taxpayer is one who gives zero return or
does not give return at all within a consecutive
period of One year,”
(4) The following Section 12A. Shall be inserted after Section 12:
“12A. Taxable value of timber transaction: (1) There shall be
levied and collected tax on the amount of royalty of the
timber of national forest or the amount of auction,
whichever is higher, at the time of auction, release or saw
order, whichever is earlier.
(2) If the timber of a personal cultivated, private
forest or community forest for business purpose and
despite that royalty is not chargeable, tax shall be eviable
as if it were the timber of national forest.”
(5) Of Section 14,-
(a) The following proviso shall be inserted in Sub-section (1):
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“Provided that, a person who carries on annual
transaction of more than One Million Rupees shall issue
invoices with serial number and permanent accounts
number as well as his or her name, and address despite
that he or she is not registered.”
(b) The following Sub-sections (4) and (5) shall be inserted
after Sub-section (3):
“(4) A person who purchases goods or service
worth more than Ten Thousand Rupees for commercial
purpose is required to take an invoice from the regist red
person. The invoice shall be kept with while transporting
such goods.”
“(5) The Department may order taxpayers to issue
invoices by using a cash machine or computer. Procedures
of such order shall be as prescribed by the Directo
General.”
(6) The following Sub-section (3) shall be inserted after Sub-section
(2) of Section 15:
“(3) Notwithstanding anything contained in Sub-sections
(1) and (2), a Local Body or Government of Nepal shall ave to
collect or recover tax at the time of sale of taxable goods or
services.
(7) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 16:
“(1a) The Department may have continuous access to the
computer database of taxpayers.”
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(8) The following Section 16B. shall be inserted after Section 16A:
“16B. Deduction of tax paid on goods in the event of loss: In
the event of loss and damage due to arson, theft, accident,
wear and tear or expired the date of uses goods of value
added tax paid on the goods shall be deducted as
prescribed.”
(9) The following Sub-section (5b) shall be inserted after Sub-
section (5a) of Section 17:
“(5b) The concerned taxpayer shall be allowed to deduct
tax paid pursuant to Section 12A. and Sub-section (3) of Section
15.”
(10) Of Section 18,-
(a) The words “or by registered post” shall be inserted after
the words “before the Tax Officer” contained in Sub-
section (1).
(b) The following Sub-sections (1a) shall be inserted after
Sub-section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), a taxpayer in a district where there is no
Inland Revenue Office may furnish the amount of tax
returns to be paid and submitted by him/her with the
Office of Funds and Accounts Controller of the same
district within the Fifteenth day of the month in which
he/she has to furnish the tax returns paying the tax. The
Office of Funds and Accounts Controller shall forwad the
returns of tax and payment of tax so received to the Inland
Revenue Office within Seven days.”
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(11) Sub-section (2) of Section 21 shall be deleted.
(12) The following Sections 23C shall be inserted after Section 23B.:
“23C. Purchase of goods of under invoicing: (1) If any person
sells any goods by under invoicing, showing the selling
price lesser than the prevailing market price, the Tax
Officer shall, notwithstanding anything contained in the
laws in force, withhold the goods in stock similar to those
goods so under invoiced and sold and the Inland Revenue
Office may purchase or cause to be purchased the sam at
the price under invoiced and sold.
(2) If, in purchasing or caused to be purchased the
goods by the Department or Office pursuant to Sub-
section (1), such a person does not agree to sell the goods,
the Department of office shall take such goods in its
custody, make calculation on the basis of the price at
which they were under invoiced and sold and make
payment when such a person shows up to receive
payment.
(3) The goods purchased or caused to be purchased
pursuant to Sub-sections (1) and (2) may be sold or
caused to be sold at such price and in accordance with
such procedures as may be specified by the Director
General.”
(13) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 25:
“(1a) Notwithstanding anything contained in Sub-section
(1), a diplomatic body or diplomat on the purchase of taxable
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goods or services shall not be refunded if the amount p rchase is
less than One Thousand Five Hundred Rupees at one time.”
(14) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of interest
shall be Fifteen per cent per annum.”
(15) Of section 29
(a) The following Clause (c) shall be substituted for Clause
(c) of Sub-section (1):
“(c) In the event of violation of Sub-sections (1) and (4)
of Section 14, Five Thousand Rupees for each
instance fine including recover the liable tax.”
(b) The following Clause (e) shall be inserted after
Clause (d) of Sub-section.
(e) Infringing Section 23c.
(16) The following Section 30A. shall be inserted after Section 30:
“30A. Power to order for reassessment of tax: (1) In cases
where, before tax is assessed, it appears from the
information given to the Director General that any action
relating to the assessment of tax is about to be irregular or
has been irregular, the Director General may, by executing
a memorandum clearly setting out the reasons, give
direction to the concerned Tax Officer to make
reassessment of tax or order any other Tax Officer to do
that act.
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(2) In cases where it appears that tax liability has
increased because of tax assessment made by the Tax
Officer recklessly or with mala fide intention, the Director
General may give order to amend such tax assessment
order within Four months after the date of initial t x
assessment.”
(17) The following Section 31A. shall be substituted for Section 31A:
“31A. Application may be made for administrative review:
(1) A person who is not satisfied with any decision of tax
assessment made by the Tax Officer may make an
application to the Department against the decision within
Thirty days of the date of receipt of a notice of that
decision.
(2) In cases where the time limit for making
application pursuant to Sub-section (1) expires andy
person makes an application for the extension of time l mit
within Seven days from the date of expiration of the ime
limit, the Department may extend the time limit for a
period not exceeding Thirty days from the date of
expiration of the time limit.
(3) A taxpayer who makes an application pursuant
to Sub-section (1) has to pay total undisputed amount f
tax, out of the amount of tax assessed, and deposit of F fty
percent cash of fine or furnish bank guarantee of such cash
out of the disputed tax assessed.
(4) If the claim of the applicant appears to be true
upon examining the evidence and documents including the
application made by the taxpayer pursuant to Sub-section
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(1), the Director General may, by executing a
memorandum setting out the clear reasons, void that tax
assessment order and direct the concerned Tax Officer to
make re-assessment of tax or order any Tax Officer to do
that act.
(5) The Department shall make decision on the
application within ninety days after the date of making of
application pursuant to Sub-section (1).
(6) If the Department does not give decision within
the time limit as referred to in Sub-section (4), the
concerned person may make an appeal to the Revenue
Tribunal pursuant to Section 32.”
(18) The following Section 32 shall be substituted for Section 32:
“32. Appeal in the Revenue Tribunal: (1) A person who is
not satisfied with an order of suspension made by the
Director General pursuant to Section 30 or a decision
made by the Department pursuant to Sub-section (4) of
Section 31A. may file an appeal in the Revenue Tribunal
according to the Revenue Tribunal Act, 2031.
(2) The person who files an appeal pursuant to
Sub-section (1) has to register a copy of the appeal with
the Department within Fifteen days of the date of filing
appeal.”
(19) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of
Nepal may obtain the service of the concerned expert for
the act related to tax auditing; and the provision
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governmental secrecy mentioned in Section 37 shall also
apply to such an expert.”
(20) The following Schedule-1 and Schedule-2 shall be substituted
for Schedule-1 and Schedule-2:
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“ Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice, wheat, maize, barley, millet, buckwheat, pulses,
flour, rye flour, grains, peas, chickpeas, kidney p as, beans and
similar basic unprocessed food materials and their extracts.
(b) Green and fresh vegetable, fresh fruits, fresh eggs, tuberous roots,
and fruits, vegetables and as use in vegetable and tuberous roots,
fresh and unprocessed agro-products. (Except those t be
supplied hotels, restaurants, bars, guest houses, cafeteria and
other similar organizations).
(c) Unprocessed cash crops/cereals (such as sugarcane, cotton,
cardamom, ginger and saffron, flax, unprocessed tobacco, tea leaf
sold by farmers, proved orthodox tea producing using biological
fertilizer, coffee, soybean, ground-nuts, rape-seed, mustard seed,
sarsyuko geda, sunflower, sesamum seed) and oil-cake.
(d) Herbs (including their extracts).
Group 2. Goods of Basic Needs:
(a) Piped water, including water supplied by tankers.
(b) Wood and coal.
(c) Kerosene (Except fuel of aircraft).
(d) Salt.
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Group 3. Live Animals and animal products
(a) Goats, sheep and mountain goats, yak and buffalos , bore and
pigs, rabbit and other such animal and their unprocessed raw
edible food items.
(b) Cows and she buffalos, she goats, and their fresh milk, (including
pasteurized), Fresh curd, bees and bee hives.
(c) Ducks, hens, cocks, turkey and similar other birds their fresh
meat and unprocessed raw items and eggs.
(d) Fresh or dried fish (except other than packed).
4. Agricultural inputs
(a) Seeds of any crops and plants as mentioned in group One.
(b) Manure, fertilizer and soil conditioners.
(c) Tools used in agriculture : Hand tools, mattocks, picks, forks
and rakes, axes, bill hooks and similar hewing tools, secateurs of
any kind, scythes, sickles, hay knives, other than d saws,
hedge shears, timber wedges, ploughshare and other tools of a
kind used in agriculture.
(d) Insecticides, fully or partially used only for crops.
(e) Use in agriculture function Tractors, cultivators, tantalum,
levelers, harvesting or threshing machine, threshers, fishing nets,
to Eight horse power up to pumping sets and up to 30 meters
hose pipe.
(f) Utensils for feeding poultry feed, box for chicken (challa), and
crate for keeping egg.
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(g) Feed and ingredient of feed supplements.
Group 5. Medicine, Medical and Similar Health services
(a) Medical or surgical services provided by health institution
operated in Government ownership.
(b) Human blood and human blood items and vaccines.
(c) Human or animal organs or tissue for medical research.
(d) Medicaments for treatment of livestock and human beings and
family planning means.
(e) Goods made for, and suitable only for the use of, infirm and
disabled persons.
(f) X-ray film and oxygen gas to be used for treatment and
(g) Raw material purchased or imported by the medicine industries
to the extent approved by the Department of Drug Management.
Group 6: Education
(a) Research related acts in schools or universities.
(b) Getting purpose for non-profit, Vocational or professional
trainings or refresher trainings.
(c) Educational services provided by schools and universities.
Group 7: Books, newspapers and printed materials
(a) Books, newsletters and periodicals publications.
(b) Newsprint.
Group 8: Artistic and cultural goods and services, carving services
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(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programs.
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
Group 9: Passengers and goods transportation services
Air transport, non tourist passenger transportation (except cabal car)
and goods carrier service (except transportation related to supply).
Group 10: Personal or Professional service:
Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually.
Group 11: Other goods or services:
1. Postal services (only those provided by the Governm nt of
Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets.
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packets.
(c) Postage stamps.
2. Financial and insurance services.
3. Bank notes and cheque books:
(a) Printing and issue of bank notes.
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(b) Supply of bank notes from foreign countries into Nepal.
(c) Cheque books.
4. Gold and silver:
(a) Gold, gold coins and gold ornaments.
(b) Silver, silver coins (Except others silver ready-made goods
and ornaments).
5. Electricity.
6. Raw wool.
7. Battery operated tempo and their chassis and Battery.
8. Bio-gas, solar power and wind power operated machine and
equipments recommended by Alternate Energy Center.
9. Aircrafts, helicopters, fire engine (Damcal), ambulances.
10. Jute products.
11. Industries and machine up to 5 percent customs duty as falling
under Part 84 of the Customs Tariff.
12. Woolen carpet and woolen carpet weaving, dying, washing and
knitting.
13. Cotton sari, Lungi, Dhoti (for both men and women), Gamcha
and cotton yarn.
14. Cotton thread.
15. Woolen yarn used in domestic hand kittening of sweater (except
artificial and acrylic.
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16. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
17. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
18. The value added tax collected by textile or match (only wooden
stick) industries and the domestic industries producing rod and
ingot using cent percent domestic iron scrap in their value
addition shall be refunded to those industries as pre cribed by
Government of Nepal.
Provided that, using cent percent domestic iron scrap
industry shall be refunded only Fifty percent from wn collected
tax.
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the
services provided by such entities carrying on business such as
hotels and guest houses).
Group 13: Betting, casinos and lotteries
Activities relating to facilities provided for the organization of
bets or gambling, and lottery.
Note:
The Department, as prescribed, and in consultation w th the Department
of Customs, interpretation of the goods and services enjoying tax
emption and the Harmonized Code of Commodities as necessary.

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Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. Goods and services purchased or imported by His Majesty the King, His
Majesty the Queen, His Royal Highness the Crown Price and other
members of the Royal family.
2. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
3. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
4. Goods or services imported by a person enjoying diplomatic facility.
5. Zero rate facility shall be available to medicine dustries if the industry
desires for such a facility.
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6. If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
shall be provided on such supplies, so long as suchtreaty or agreement
is in effect.
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Financial Ordinance, 2060 (2004)
Date of Authentication and the Publication
2060.10.1 (15 January 2004)
Ordinance number 19 of the year 2060
An Ordinance Made to Implement Proposals Relating to Finance of
the Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal and at the moment Parliament is not in
session;
Now, therefore, be it enacted by His Majesty the King Gyanendra Bir
Bikram Shah Dev, in accordance with Articles 72 of C nstitution kingdom of
Nepal, 2047(1990).
1. Short title and commencement: (1) This Act may be called as the
“Financial Ordinance, 2060 (2004)."
(2) This ordinance come into force immediately.
22. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) The following Clause (t) shall be substituted for Clause (t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax Officer and
the Chief Tax Administrator appointed by the Governme t
of Nepal for the purpose of this Act, and this term
includes a section office, director and deputy director at
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the Department or such other officer designated by the
Government of Nepal authorizing to exercise the powers
of Tax Officer under this Act.”
(2) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of Ten percent.”
(3) The following Clause (d1) shall be inserted after Clause (d) of
Sub-section (1) of Section 11:
“(d1) If the taxpayer is one who gives zero return or
does not give return at all within a consecutive
period of One year,”
(4) The following Section 12A. Shall be inserted after Section 12:
“12A. Taxable value of timber transaction: (1) There shall be
levied and collected tax on the amount of royalty of the
timber of national forest or the amount of auction,
whichever is higher, at the time of auction, release or saw
order, whichever is earlier.
(2) If the timber of a personal cultivated, private
forest or community forest for business purpose and
despite that royalty is not chargeable, tax shall be eviable
as if it were the timber of national forest.”
(5) Of Section 14,-
(a) The following proviso shall be inserted in Sub-section (1):
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“Provided that, a person who carries on annual
transaction of more than One Million Rupees shall issue
invoices with serial number and permanent accounts
number as well as his or her name, and address despite
that he or she is not registered.”
(b) The following Sub-sections (4) and (5) shall be inserted
after Sub-section (3):
“(4) A person who purchases goods or service worth
more than Ten Thousand Rupees for commercial purpose
is required to take an invoice from the registered p rson.
The invoice shall be kept with while transporting such
goods.
(5) The Department may order taxpayers to issue
invoices by using a cash machine or computer. Procedures
of such order shall be as prescribed by the Directo
General.”
(6) The following Sub-section (3) shall be inserted after Sub-section
(2) of Section 15:
“(3) Notwithstanding anything contained in Sub-sections
(1) and (2), a Local Body or Government of Nepal shall ave to
collect or recover tax at the time of sale of taxable goods or
services.
(7) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 16:
“(1a) The Department may have continuous access to the
computer database of taxpayers.”
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(8) The following Section 16B. shall be inserted after Section 16A:
“16B. Deduction of tax paid on goods in the event of loss: In
the event of loss and damage due to arson, theft, accident,
wear and tear or expired the date of uses goods of value
added tax paid on the goods shall be deducted as
prescribed.”
(9) The following Sub-section (5b) shall be inserted after Sub-
section (5a) of Section 17:
“(5b) The concerned taxpayer shall be allowed to deduct
tax paid pursuant to Section 12A. and Sub-section (3) of Section
15.”
(10) Of Section 18,-
(a) The words “or by registered post” shall be inserted after
the words “before the Tax Officer” contained in Sub-
section (1).
(b) The following Sub-sections (1a) shall be inserted after
Sub-section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), a taxpayer in a district where there is no
Inland Revenue Office may furnish the amount of tax
returns to be paid and submitted by him/her with the
Office of Funds and Accounts Controller of the same
district within the Fifteenth day of the month in which
he/she has to furnish the tax returns paying the tax. The
Office of Funds and Accounts Controller shall forwad the
returns of tax and payment of tax so received to the Inland
Revenue Office within Seven days.”
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(11) Sub-section (2) of Section 21 shall be deleted.
(12) The following Sections 23C shall be inserted after Section 23B.
“23C. Purchase of goods of under invoicing: (1) If any person
sells any goods by under invoicing, showing the selling
price lesser than the prevailing market price, the Tax
Officer shall, notwithstanding anything contained in the
laws in force, withhold the goods in stock similar to those
goods so under invoiced and sold and the Inland Revenue
Office may purchase or cause to be purchased the sam at
the price under invoiced and sold.
(2) If, in purchasing or caused to be purchased the
goods by the Department or Office pursuant to Sub-
section (1), such a person does not agree to sell the goods,
the Department of office shall take such goods in its
custody, make calculation on the basis of the price at
which they were under invoiced and sold and make
payment when such a person shows up to receive
payment.
(3) The goods purchased or caused to be purchased
pursuant to Sub-sections (1) and (2) may be sold or
caused to be sold at such price and in accordance with
such procedures as may be specified by the Director
General.”
(13) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 25:
“(1a) Notwithstanding anything contained in Sub-section
(1), a diplomatic body or diplomat on the purchase of taxable
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goods or services shall not be refunded if the amount p rchase is
less than One Thousand Five Hundred Rupees at one time.”
(14) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of interest
shall be Fifteen per cent per annum.”
(15) Of section 29
(a) The following Clause (c) shall be substituted for Clause
(c) of Sub-section (1):
“(c) In the event of violation of Sub-sections (1) and (4)
of Section 14, Five Thousand Rupees for each
instance fine including recover the liable tax.”
(b) The following Clause (e) shall be inserted after
Clause (d) of Sub-section.
(e) Infringing Section 23c.
(16) The following Section 30A. shall be inserted after Section 30:
“30A. Power to order for reassessment of tax: (1) In cases
where, before tax is assessed, it appears from the
information given to the Director General that any action
relating to the assessment of tax is about to be irregular or
has been irregular, the Director General may, by executing
a memorandum clearly setting out the reasons, give
direction to the concerned Tax Officer to make
reassessment of tax or order any other Tax Officer to do
that act.
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(2) In cases where it appears that tax liability has
increased because of tax assessment made by the Tax
Officer recklessly or with mala fide intention, the Director
General may give order to amend such tax assessment
order within Four months after the date of initial t x
assessment.”
(17) The following Section 31A. shall be substituted for Section 31A:
“31A. Application may be made for administrative review:
(1) A person who is not satisfied with any decision of tax
assessment made by the Tax Officer may make an
application to the Department against the decision within
Thirty days of the date of receipt of a notice of that
decision.
(2) In cases where the time limit for making
application pursuant to Sub-section (1) expires andy
person makes an application for the extension of time l mit
within Seven days from the date of expiration of the ime
limit, the Department may extend the time limit for a
period not exceeding Thirty days from the date of
expiration of the time limit.
(3) The taxpayer who makes an application
pursuant to Sub-section (1) has to pay total undisputed
amount of tax, out of the amount of tax assessed, an
deposit of Fifty percent cash of fine or furnish bank
guarantee of such cash out of the disputed tax assessed.
(4) If the claim of the applicant appears to be true
upon examining the evidence and documents including the
application made by the taxpayer pursuant to Sub-section
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(1), the Director General may, by executing a
memorandum setting out the clear reasons, void that tax
assessment order and direct the concerned Tax Officer to
make re-assessment of tax or order any Tax Officer to do
that act.
(5) The Department shall make decision on the
application within Ninety days after the date of making of
application pursuant to Sub-section (1).
(6) If the Department does not give decision within
the time limit as referred to in Sub-section (4), the
concerned person may make an appeal to the Revenue
Tribunal pursuant to Section 32.”
(18) The following Section 32 shall be substituted for Section 32:
“32. Appeal in the Revenue Tribunal: (1) A person who is
not satisfied with an order of suspension made by the
Director General pursuant to Section 30 or a decision
made by the Department pursuant to Sub-section (4) of
Section 31A. may file an appeal in the Revenue Tribunal
according to the Revenue Tribunal Act, 2031.
(2) The person who files an appeal pursuant to
Sub-section (1) has to register a copy of the appeal with
the Department within Fifteen days of the date of filing
appeal.”
(19) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of
Nepal may obtain the service of the concerned expert for
the act related to tax auditing; and the provision
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governmental secrecy mentioned in Section 37 shall also
apply to such an expert.”
(20) The following Schedule-1 and Schedule-2 shall be substituted
for Schedule-1 and Schedule-2:
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“ Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice, wheat, maize, barley, millet, buckwheat, pulses,
flour, rye flour, grains, peas, chickpeas, kidney p as, beans and
similar basic unprocessed food materials and their extracts.
(b) Green and fresh vegetable, fresh fruits, fresh eggs, tuberous roots,
and fruits, vegetables and as use in vegetable and tuberous roots,
fresh and unprocessed agro-products. (Except those t be
supplied hotels, restaurants, bars, guest houses, cafeteria and
other similar organizations).
(c) Unprocessed cash crops/cereals (such as sugarcane, cotton,
cardamom, ginger and saffron, flax, unprocessed tobacco, tea leaf
sold by farmers, proved orthodox tea producing using biological
fertilizer, coffee, soybean, ground-nuts, rape-seed, mustard seed,
sarsyuko geda, sunflower, sesamum seed) and oil-cake.
(d) Herbs (including their extracts).
Group 2. Goods of Basic Needs:
(a) Piped water, including water supplied by tankers.
(b) Wood and coal.
(c) Kerosene (Except fuel of aircraft).
(d) Salt.
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Group 3. Live Animals and animal products
(a) Goats, sheep and mountain goats , yak and buffalos , bore and
pigs , rabbit and other such animal and their unprocessed raw
edible food items.
(b) Cows and she buffalos, she goats, and their fresh milk, (including
pasteurized), Fresh curd, bees and bee hives.
(c) Ducks, hens, cocks, turkey and similar other birds their fresh
meat and unprocessed raw items and eggs.
(d) Fresh or dried fish (except other than packed).
4. Agricultural inputs
(a) Seeds of crops plants, mentioned above in group One.
(b) Manure, fertilizer and soil conditioners.
(c) Tools used in agriculture : Hand tools, mattocks, picks, forks
and rakes, axes, bill hooks and similar hewing tools, secateurs of
any kind, scythes, sickles, hay knives, other than d saws,
hedge shears, timber wedges, ploughshare and other tools of a
kind used in agriculture.
(d) Insecticides, fully or partially used only for crops.
(e) Use in agriculture function Tractors, cultivators, tantalum,
levelers, harvesting or threshing machine, threshers, fishing nets,
to Eight horse power up to pumping sets and up to 30 meters
hose pipe.
(f) Utensils for feeding poultry feed, box for chicken (challa), and
crate for keeping egg.
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(g) Feed and ingredient of feed supplements.
Group 5. Medicine, Medical and Similar Health services
(a) Medical or surgical services provided by health institution
operated in Government ownership.
(b) Human blood and human blood items and vaccines.
(c) Human or animal organs or tissue for medical research.
(d) Medicaments for treatment of livestock and human beings and
family planning means.
(e) Goods made for, and suitable only for the use of, infirm and
disabled persons.
(f) X-ray film and oxygen gas to be used for treatment, and
(g) Raw material purchased or imported by the medicine industries
to the extent approved by the Department of Drug Management.
Group 6: Education
(a) Research related acts in schools or universities,
(b) Getting purpose for non-profit, Vocational or professional
trainings or refresher trainings.
(c) Educational services provided by schools and universities.
Group 7: Books, newspapers and printed materials
(a) Books, newsletters and periodicals publications.
(b) Newsprint.
Group 8: Artistic and cultural goods and services, carving services
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(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programs.
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
Group 9: Passengers and goods transportation services
Air transport, non tourist passenger transportation (except cabal car)
and goods carrier service (except transportation related to supply).
Group 10: Personal or Professional service:
Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually.
Group 11: Other goods or services:
1. Postal services (only those provided by the Governm nt of
Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets.
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packets.
(c) Postage stamps.
2. Financial and insurance services.
3. Bank notes and cheque books:
(a) Printing and issue of bank notes.
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(b) Supply of bank notes from foreign countries into Nepal.
(c) Cheque books.

4. Gold and silver:
(a) Gold, gold coins and gold ornaments.
(b) Silver, silver coins (Except others silver ready-made goods
and ornaments).
5. Electricity.
6. Raw wool.
7. Battery operated tempo and their chassis and Battery.
8. Bio-gas, solar power and wind power operated machine and
equipments recommended by Alternate Energy Center.
9. Aircrafts, helicopters, fire engine (Damcal), ambulances and
corpse carrying vehicles.
10. Jute products.
11. Industries and machine up to 5 percent customs duty as falling
under Part 84 of the Customs Tariff.
12. Woolen carpet and woolen carpet weaving, dying, washing and
knitting.
13. Cotton sari, Lungi, Dhoti (for both men and women), Gamcha
and cotton yarn.
14. Cotton thread.
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15. Woolen yarn used in domestic hand kittening of sweater (except
artificial and acrylic.
16. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
17. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
18. The value added tax collected by textile or match (only wooden
stick) industries and the domestic industries producing rod and
ingot using cent percent domestic iron scrap in their value
addition shall be refunded to those industries as pre cribed by
Government of Nepal.
Provided that, using cent percent domestic iron scrap
industry shall be refunded only Fifty percent from wn collected
tax.
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the
services provided by such entities carrying on business such as
hotels and guest houses).
Group 13: Betting, casinos and lotteries
Activities relating to facilities provided for the organization of
bets or gambling, and lottery.

Note:
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The Department, as prescribed, and in consultation w th the Department
of Customs, interpretation of the goods and services enjoying tax
emption and the Harmonized Code of Commodities as necessary.
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Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. Goods and services purchased or imported by His Majesty the King, His
Majesty the Queen, His Royal Highness the Crown Price and other
members of the Royal family.
2. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
3. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
4. Goods or services imported by a person enjoying diplomatic facility.
5. Zero rate facility shall be available to medicine dustries if the industry
desires for such a facility.
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6. If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
shall be provided on such supplies, so long as suchtreaty or agreement
is in effect.”
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Financial Ordinance, 2061 (2004)
Date of Authentication and Publication
2061.4.1 (16 July 2004)

Ordinance number 3 of the year 2061
An Ordinance Made to Implement Proposals Relating to Finance of
the Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal and at the moment Parliament is not in
session;
Now, therefore, be it enacted by His Majesty the King Gyanendra Bir
Bikram Shah Dev, in accordance with Articles 72 of C nstitution kingdom of
Nepal, 2047(1990).
1. Short title and commencement: (1) This Act may be called as the
“Financial Ordinance, 2061 (2004)."
(2) This ordinance come into force immediately.
22. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) The following Clause (t) shall be substituted for Clause (t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax
Officer and the Chief Tax Administrator appointed
by the Government of Nepal for the purpose of this
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Act, and this term includes a section office, director
and deputy director at the Department or such
other officer designated by the Government of
Nepal authorizing to exercise the powers of Tax
Officer under this Act.”
(2) The following Section 5A. Shall be substituted for Section 5A:
“5A. Tax not to be levied on transfer of ownership of
transactions: Notwithstanding anything contained
elsewhere in this Act, in cases where a registered person
sells the transaction being carried out by him or her to any
other registered person or the transaction is transferred in
the name of his or her heir by virtue of death, such transfer
of ownership shall not be subject to tax. The person
registered in so selling or transferring the transaction shall
give information thereof to the Department as prescribed.
Provided that, a person who registered for
purchasing such transaction shall bear the transferor’s
liability of tax.
(3) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of Ten percent.”
(4) The following Section 8A. shall be inserted after Section 8:
“8A. Provision of bank guarantee: (1) A productive industry
that exports more than ninety percent of the total sale of
the last Twelve months after minimum Twenty percent
value added, raw materials or subsidiary raw materil
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required to produce the goods in the quantity of import to
be imported by furnishing a bank guarantee.
(2) The bank guarantee furnished pursuant to Sub-
section (1) and it shall be released from accordance with
the procedures prescribed by the Department.
(5) The following Clause (d1) shall be inserted after Clause (d) of
Sub-section (1) of Section 11:
“(d1) If the taxpayer is one who gives zero return or
does not give return at all within a consecutive
period of One year,”
(6) The following Section 12A. Shall be inserted after Section 12:
“12A. Taxable value of timber transaction: (1) There shall be
levied and collected tax on the amount of royalty of the
timber of national forest or the amount of auction,
whichever is higher, at the time of auction, release or saw
order, whichever is earlier.
(2) If the timber of a personal cultivated, private
forest or community forest for business purpose and
despite that royalty is not chargeable, tax shall be eviable
as if it were the timber of national forest.”
(7) Of Section 14,-
(a) The following proviso shall be inserted in Sub-section (1):
“Provided that, a person who carries on annual
transaction of more than One Million Rupees shall issue
invoices with serial number and permanent accounts
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number as well as his or her name, and address despite
that he or she is not registered.”
(b) The following Sub-sections (4) and (5) shall be inserted
after Sub-section (3):
“(4) A person who purchases goods or service worth
more than Ten Thousand Rupees for commercial purpose
is required to take an invoice from the registered p rson.
The invoice shall be kept with while transporting such
goods.
(5) The Department may order taxpayers to issue
invoices by using a cash machine or computer. Procedures
of such order shall be as prescribed by the Directo
General.”
(8) The following Sub-section (3) shall be inserted after Sub-section
(2) of Section 15:
“(3) Notwithstanding anything contained in Sub-sections
(1) and (2), a Local Body or Government of Nepal shall ave to
collect or recover tax at the time of sale of taxable goods or
services.”
(9) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 16:
“(1a) The Department may have continuous access to the
computer database of taxpayers.”
(10) The following Section 16B. shall be inserted after Section 16A:
“16B. Deduction of tax paid on goods in the event of loss: In
the event of loss and damage due to arson, theft, accident,
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wear and tear or expired the date of uses goods of value
added tax paid on the goods shall be deducted as
prescribed.”
(11) Of Section 17,-
(a) The words "high price" shall be deleted contained in
Clause (d) of Sub-section (2).
(b) The following Sub-section (5a) shall be substituted for
Sub-section (5a):
“(5a) The concerned taxpayer shall be allowed to
deduct tax paid on the capital goods that were imported or
purchased by entering into a loan agreement under
financial lease subject to Sub-section (2).”
(c) The following Sub-section (5b) shall be inserted after
Sub-section (5a) :
“(5b) The concerned taxpayer shall be allowed to
deduct tax paid pursuant to Section 12A. and Sub-section
(3) of Section 15.”
(12) Of Section 18,-
(a) The words “or by registered post” shall be inserted after
the words “before the Tax Officer” contained in Sub-
section (1).
(b) The following Sub-sections (1a) shall be inserted after
Sub-section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), a taxpayer in a district where there is no
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Inland Revenue Office may furnish the amount of tax
returns to be paid and submitted by him/her with the
Office of Funds and Accounts Controller of the same
district within the Fifteenth day of the month in which
he/she has to furnish the tax returns paying the tax. The
Office of Funds and Accounts Controller shall forwad the
returns of tax and payment of tax so received to the Inland
Revenue Office within Seven days.”
(13) Of Section 19,-
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a taxpayer does not pay the tax within the
time limit specified in Sub-section (1), an extra charge of
Ten percent per annum shall be imposed on the amount of
tax due and outstanding.”
(b) Sub-section (3) shall be deleted.
(c) The word and number “or (3)” shall be deleted contained
in Sub-section (4).
(d) The word and number “and (3)” shall be deleted
contained in Sub-section (5).
(14) Sub-section (2) of Section 21 shall be deleted.
(15) The following Sections 23C shall be inserted after Section 23B.
“23C. Purchase of goods of under invoicing: (1) If any person
sells any goods by under invoicing, showing the selling
price lesser than the prevailing market price, the Tax
Officer shall, notwithstanding anything contained in the
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laws in force, withhold the goods in stock similar to those
goods so under invoiced and sold and the Inland Revenue
Office may purchase or cause to be purchased the sam at
the price under invoiced and sold.
(2) If, in purchasing or caused to be purchased the
goods by the Department or Office pursuant to Sub-
section (1), such a person does not agree to sell the goods,
the Department of office shall take such goods in its
custody, make calculation on the basis of the price at
which they were under invoiced and sold and make
payment when such a person shows up to receive
payment.
(3) The goods purchased or caused to be purchased
pursuant to Sub-sections (1) and (2) may be sold or
caused to be sold at such price and in accordance with
such procedures as may be specified by the Director
General.”
(16) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 25:
“(1a) Notwithstanding anything contained in Sub-section
(1), a diplomatic body or diplomat on the purchase of taxable
goods or services shall not be refunded if the amount p rchase is
less than One Thousand Five Hundred Rupees at one time.”
(17) The following Sections 25A. shall be inserted after Section 25:
“25A. Refund of tax paid by foreign tourist on purchase: If a
foreign tourist visiting Nepal and returning by air
purchases taxable goods of more than Fifteen Thousand
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Rupees and takes them with him or her, the tax paidon
such goods shall be refunded in accordance with the
procedures specified by the Department.”
(18) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of interest
shall be Fifteen per cent per annum.”
(19) Of section 29
(a) The following Clause (c) shall be substituted for Clause
(c) of Sub-section (1):
“(c) In the event of violation of Sub-sections (1) and (4)
of Section 14, Five Thousand Rupees for each
instance fine including recover the liable tax.”
(b) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) In the event of lessening tax liability without
observing this Act or the Rules framed under this
Act, the Tax Officer may fine up to Twenty Five
percent of the amount of tax, on the grounds as
specified by the Department.”
(c) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a person commits any of the following offences,
the Tax Officer may impose a fine of cent percent of
the amount of tax or an imprisonment up to Six
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months or both the fine and the imprisonment on
such a person:
(a) Preparing false accounts, invoices or other
documents;
(b) Committing an evasion of tax by fraud;
(c) If an unregistered person acts as if he/she
were a registered person;
(d) Transaction in Infringing Section 30,
(e) Infringing Section 23c.
(20) The following Section 30A. shall be inserted after Section 30:
“30A. Power to order for reassessment of tax: (1) In cases
where, before tax is assessed, it appears from the
information given to the Director General that any action
relating to the assessment of tax is about to be irregular or
has been irregular, the Director General may, by executing
a memorandum clearly setting out the reasons, give
direction to the concerned Tax Officer to make
reassessment of tax or order any other Tax Officer to do
that act.
(2) In cases where it appears that tax liability has
increased because of tax assessment made by the Tax
Officer recklessly or with mala fide intention, the Director
General may give order to amend such tax assessment
order within Four months after the date of initial t x
assessment.”
(21) The following Section 31A. shall be substituted for Section 31A:
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“31A. Application may be made for administrative review:
(1) A person who is not satisfied with any decision of tax
assessment made by the Tax Officer may make an
application to the Department against the decision within
Thirty days of the date of receipt of a notice of that
decision.
(2) In cases where the time limit for making
application pursuant to Sub-section (1) expires andy
person makes an application for the extension of time l mit
within Seven days from the date of expiration of the ime
limit, the Department may extend the time limit for a
period not exceeding Thirty days from the date of
expiration of the time limit.
(3) If the claim of the applicant appears to be true
upon examining the evidence and documents including the
application made by the taxpayer pursuant to Sub-section
(1), the Director General may, by executing a
memorandum setting out the clear reasons, void that tax
assessment order and direct the concerned Tax Officer to
make re-assessment of tax or order any Tax Officer to do
that act.
(4) The Department shall make decision on the
application within Sixty days after the date of making of
application pursuant to Sub-section (1).
(5) If the Department does not give decision within
the time limit as referred to in Sub-section (4), the
concerned person may make an appeal to the Revenue
Tribunal pursuant to Section 32.”
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(22) The following Section 32 shall be substituted for Section 32:
“32. Appeal in the Revenue Tribunal: (1) A person who is
not satisfied with an order of suspension made by the
Director General pursuant to Section 30 or a decision
made by the Department pursuant to Sub-section (4) of
Section 31A. may file an appeal in the Revenue Tribunal
according to the Revenue Tribunal Act,2031.
(2) The person who files an appeal pursuant to
Sub-section (1) has to register a copy of the appeal with
the Department within Fifteen days of the date of filing
appeal.”
(23) The following Section 32A. shall be inserted after Section 32:
“32A. Advance ruling: (1) If any person makes an application in
writing to the Department for the removal of any
confusion as to the application of this Act, the Department
may issue its version by an advance ruling as prescribed,
by notifying the person in writing.
(2) Notwithstanding anything contained in Sub-
section (1), the Department shall not be entitled to issue
an advance ruling referred to in Sub-section (1) on any
matter of confusion occurred in the implementation of this
Act in cases where such matter is sub judice in the court
or has already been decided by the court.”
(24) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of
Nepal may obtain the service of the concerned expert for
the act related to tax auditing; and the provision
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governmental secrecy mentioned in Section 37 shall also
apply to such an expert.”
(25) The following Schedule-1 and Schedule-2 shall be substituted
for Schedule-1 and Schedule-2:
Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice, wheat, maize, barley, millet, buckwheat, pulses,
flour, rye flour, grains, peas, chickpeas, kidney p as, beans and
similar basic unprocessed food materials and their extracts.
(b) Green and fresh vegetable, fresh fruits, fresh eggs, tuberous roots,
and fruits, vegetables and as use in vegetable and tuberous roots,
fresh and unprocessed agro-products. (Except those t be
supplied hotels, restaurants, bars, guest houses, cafeteria and
other similar organizations).
(c) Unprocessed cash crops/cereals (such as sugarcane, cotton,
cardamom, ginger and saffron, flax, unprocessed tobacco shall be
sold by farmers, tea leaf, proved orthodox tea producing using
biological fertilizer, seed of coffee, soybean, ground-nuts, rape-
seed, mustard seed, sarsyu seed, sunflower seed, sesamum seed)
and oil-cake.
(d) Herbs (including their extracts).
Group 2. Goods of Basic Needs:
(a) Piped water, including water supplied by tankers.
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(b) Wood and coal.
(c) Kerosene (Except fuel of aircraft).
(d) Salt.
Group 3. Live Animals and animal products
(a) Goats, sheep and mountain goats , yak and buffalos , bore and
pigs , rabbit and other such animal and their unprocessed raw
edible food items.
(b) Cows and she buffalos, she goats, and their fresh milk, (including
pasteurized), Fresh curd, bees and bee hives.
(c) Ducks, hens, cocks, turkey and similar other birds their fresh
meat and unprocessed raw items and eggs.
(d) Fresh or dried fish (except other than packed).
4. Agricultural inputs
(a) Seeds of any crops and plants as mentioned in group One.
(b) Manure, fertilizer and soil conditioners.
(c) Tools used in agriculture : Hand tools, mattocks, picks, forks
and rakes, axes, bill hooks and similar hewing tools, secateurs of
any kind, scythes, sickles, hay knives, other than d saws,
hedge shears, timber wedges, ploughshare and other tools of a
kind used in agriculture.
(d) Insecticides, fully or partially used only for crops.
(e) Use in agriculture function Tractors, cultivators, tantalum,
levelers, harvesting or threshing machine, threshers, fishing nets,
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to Eight horse power up to pumping sets and up to 30 meters
hose pipe.
(f) Utensils for feeding poultry feed, box for chicken (challa), and
crate for keeping egg.
(g) Feed and ingredient of feed supplements.
Group 5. Medicine, Medical and Similar Health services
(a) Medical or surgical services provided by health institution
operated in Government ownership.
(b) Human blood and human blood items and vaccines.
(c) Human or animal organs or tissue for medical research.
(d) Medicaments for treatment of livestock and human beings and
family planning means.
(e) Goods made for, and suitable only for the use of, infirm and
disabled persons.
(f) X-ray film and oxygen gas to be used for treatment, and
(g) Raw material purchased or imported by the medicine industries
to the extent approved by the Department of Drug Management.
Group 6: Education
(a) Research related acts in schools or universities.
(b) Getting purpose for non-profit, Vocational or professional
trainings or refresher trainings.
(c) Educational services provided by schools and universities.
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Group 7: Books, newspapers and printed materials
(a) Books, newsletters and printing and publication hereof.
(b) Newsprint.
Group 8: Artistic and cultural goods and services, carving services
(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programs.
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
Group 9: Passengers and goods transportation services
Air transport, non tourist passenger transportation (except cabal car)
and goods carrier service (except transportation related to supply).
Group 10: Personal or Professional service:
Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually.
Group 11: Other goods or services:
1. Postal services (only those provided by the Governm nt of
Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets.
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packets.
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(c) Postage stamp.
2. Excise duty stamp.
3. Financial and insurance services.
4. Bank notes and cheque books:
(a) Printing and issue of bank notes.
(b) Supply of bank notes from foreign countries into Nepal.
(c) Cheque books.
5. Gold and silver:
(a) Gold, gold coins and gold ornaments,
(b) Silver, silver coins (Except others silver ready-made goods
and ornaments)
6. Electricity.
7. Raw wool.
8. Battery operated tempo and their chassis and Battery.
9. Bio-gas, solar power and wind power operated machine and
equipments recommended by Alternate Energy Center.
10. Aircrafts, helicopters, fire engine (Damcal), ambulances,
11. Jute products.
12. Industries and machine up to 5 percent customs duty as falling
under Part 84 of the Customs Tariff.
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13. Woolen carpet and woolen carpet weaving, dying, washing and
knitting.
14. Cotton sari, Lungi, Dhoti (for both men and women), Gamcha
and cotton yarn.
15. Cotton thread (Sub-heading no of custom 5205 and 5207)
16. Woolen yarn used in domestic hand kittening of sweater (except
artificial and acrylic.
17. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
18. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
19. The value added tax collected by textile or match (only wooden
stick) industries and the domestic industries producing rod and
ingot using cent percent domestic iron scrap in their value
addition shall be refunded to those industries as pre cribed by
Government of Nepal.
Provided that, using cent percent domestic iron scrap
industry shall be refunded only Twenty Five percent from own
collected tax.
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the
services provided by such entities carrying on business such as
hotels and guest houses).
Group 13: Betting, casinos and lotteries
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Activities relating to facilities provided for the organization of
bets or gambling, and lottery.
Note:
The Department, as prescribed, and in consultation w th the Department
of Customs, interpretation of the goods and services enjoying tax
emption and the Harmonized Code of Commodities as necessary.
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Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. Goods and services purchased or imported by His Majesty the King, His
Majesty the Queen, His Royal Highness the Crown Price and other
members of the Royal family.
2. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
3. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
4. Goods or services imported by a person or mission enjoying diplomatic
facility and a person serving in a diplomatic mission enjoying tariff
facility, on the recommendation of the Ministry of Foreign Affairs,
Government of Nepal.
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5. Zero rate facility shall be available to medicine dustries if the industry
desires for such a facility.
6. If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
shall be provided on such supplies, so long as suchtreaty or agreement
is in effect.
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Financial Ordinance, 2062 (2005)
Date of Authentication and Publication
2062.4.1(16, July 2005)
Ordinance number 12 of the year 2062
An Ordinance Made to Implement Proposals Relating to Finance of
the Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal and at the moment Parliament is not in
session;
Now, therefore, be it enacted by His Majesty the King Gyanendra Bir
Bikram Shah Dev, in accordance with Article 72 of Constitution Kingdom of
Nepal, 2047(1990).
1. Short title and commencement: (1) This Ordinance may be called
as the “Financial Ordinance, 2062 (2005)."
(2) This ordinance come into force immediately.
24. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) The following Clause (t) shall be substituted for Clause (t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax
Officer and the Chief Tax Administrator appointed
by the Government of Nepal for the purpose of this
Act, and this term includes a section office, director
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and deputy director at the Department or such
other officer designated by the Government of
Nepal authorizing to exercise the powers of Tax
Officer under this Act.”
(2) The following Section 4 shall be substituted for Section 4:
“4. Jurisdiction of the Tax Officer: (1) The jurisdiction of
Tax Officer shall be as prescribed by the Government of
Nepal.
(2) The Director General may also so designate a
Tax Office as to inspect and monitor also the transaction
of taxpayers in other areas than those falling under his or
her jurisdiction.”
(3) The following Section 5A. shall be substituted for Section 5A:
“5A. Tax not to be levied on transfer of ownership of
transactions: Notwithstanding anything contained
elsewhere in this Act, in cases where a registered person
sells the transaction being carried out by him or her to any
other registered person or the transaction is transferred in
the name of his or her heir by virtue of death, such transfer
of ownership shall not be subject to tax. The person
registered in so selling or transferring the transaction shall
give information thereof to the Department as prescribed.
Provided that, the registered person who has
purchased such transaction shall bear the liability of tax of
the predecessor.
(4) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
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“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of Thirteen percent.”
(5) The following Section 8A. shall be inserted after Section 8:
“8A. Provision of bank guarantee: (1) A productive industry
that exports more than ninety percent of the total sale of
the last Twelve months after minimum Twenty percent
value added, raw materials or subsidiary raw materil
required to produce the goods in the quantity of import to
be imported by furnishing a bank guarantee.
(2) Duty free shop may furnish value added tax as
bank guarantee of tax liable in export goods through a
bonded warehouse. (3) The bank guarantee furnished
pursuant to Sub-section (1) and (2) and it shall be
released from accordance with the procedures prescrib d
by the Department.
Provided that, in the case of garment export
industry the concerned custom office, in the
recommendation of Inland Revenue Department, shall
permit export upon accepting the bank guarantee.
(6) The following Section 9 shall be substituted for Section 9:
“9. Exemption for small vendor: Notwithstanding anything
contained in the other provisions of this Act, an exemption
may be provided to a small vendor, having a prescribed
annual taxable transaction threshold, from the
requirements of registration and filing of tax returns and
from such requirements as may be prescribed.
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Provided that, if any transaction of hardware,
sanitary, furniture, fixture, furnishing, automobiles, motor
parts, electronics, and marble has to be registered
compulsorily within a Municipal Corporation, Sub-
municipal Corporation, Municipality or other small
vendor wishes to have his/her transaction registered
voluntarily, he/she may have such registration after
completing the procedures as referred to in Section 10.”
(7) The following Clause (c) shall be substituted for Clause (c) of
Sub-section (1) of Section 11:
“(c) In the case of a partnership firm, if such partnership
firm is dissolved or the partner dies,”
(8) The following Clause (d1) shall be inserted after Clause (d) of
Sub-section (1) of Section 11:
“(d1) If the taxpayer is one who gives zero return or
does not give return at all within a consecutive
period of One year,”
(9) The following Section 12A. Shall be inserted after Section 12:
“12A. Taxable value of timber transaction: (1) There shall be
levied and collected tax on the amount of royalty of the
timber of national forest or the amount of auction,
whichever is higher, at the time of auction, release or saw
order, whichever is earlier.
(2) If the timber of a personal cultivated, private
forest or community forest for business purpose and
despite that royalty is not chargeable, tax shall be eviable
as if it were the timber of national forest.”
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(10) Of Section 14,-
(a) The following proviso shall be inserted in Sub-section (1):
“Provided that a person who carries on annual
transaction of more than One Million Rupees shall issue
invoices with serial number and permanent accounts
number as well as his or her name, and address despite
that he or she is not registered.”
(b) The following Sub-sections (4) and (5) shall be inserted
after Sub-section (3):
“(4) A person who purchases goods or service worth
more than Ten Thousand Rupees for commercial purpose
is required to take an invoice from the registered p rson.
The invoice shall be kept with while transporting such
goods.
(5) The Department may order taxpayers to issue
invoices by using a cash machine or computer. Procedures
of such order shall be as prescribed by the Directo
General.
(11) The following Sub-section (3) shall be inserted after Sub-section
(2) of Section 15:
“(3) Notwithstanding anything contained in Sub-sections
(1) and (2), a Local Body or Government of Nepal shall ave to
collect or recover tax at the time of sale of taxable goods or
services.
(12) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 16:
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“(1a) The Department may have continuous access to the
computer (database) of taxpayers.”
(13) The following Section 16B. shall be inserted after Section 16A:
“16B. Deduction of tax paid on goods in the event of loss: In
the event of loss and damage due to arson, theft, accident,
wear and tear or expired the date of uses goods of value
added tax paid on the goods shall be deducted as
prescribed.”
(14) Of Section 17,-
(a) The words "high price" shall be deleted contained in
Clause (d) of Sub-section (2).
(b) The following Sub-section (5a) shall be substituted for
Sub-section (5a):
“(5a) The concerned taxpayer shall be allowed to
deduct tax paid on the capital goods that were imported or
purchased by entering into a loan agreement under
financial lease subject to Sub-section (2).”
(c) The following Sub-section (5b) shall be inserted after
Sub-section (5a):
“(5b) The concerned taxpayer shall be allowed to
deduct tax paid pursuant to Section 12A. and Sub-section
(3) of Section 15.”
(15) Of Section 18,-
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(a) The words “or by registered post” shall be inserted after
the words “before the Tax Officer” contained in Sub-
section (1).
(b) The following Sub-sections (1a) shall be inserted after
Sub-section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), a taxpayer in a district where there is no
Inland Revenue Office may furnish the amount of tax
returns to be paid and submitted by him/her with the
Office of Funds and Accounts Controller of the same
district within the Fifteenth day of the month in which
he/she has to furnish the tax returns paying the tax. The
Office of Funds and Accounts Controller shall forwad the
returns of tax and payment of tax so received to the Inland
Revenue Office within Seven days.”
(16) Of Section 19,-
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a taxpayer does not pay the tax within the
time limit specified in Sub-section (1), an extra charge of
Ten percent per annum shall be imposed on the amount of
tax due and outstanding.”
(b) Sub-section (3) shall be deleted.
(c) The word and number “or (3)” shall be deleted contained
in Sub-section (4).
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(d) The word and number “or (3)” shall be deleted contained
in Sub-section (5).
(17) The following Sub-section (4) shall be substituted for Sub-
section (4) then inserted Sub-section (4a) of Section 20:
“(4) In assessing the tax pursuant to Sub-section (1), tax
assessment shall have to be made within Four years from the date
of submission of the tax returns. If the tax assessm nt cannot be
made within that period, the returns so filed shall ipso facto be
considered to be valid.”
“(4a) Notwithstanding anything contained in Sub-section
(4), where any person has evaded tax by preparing false accounts
or invoices or other documents or by fraud, the Department may
at any time issue an order for the reassessment of tax.”
(18) Sub-section (2) of Section 21 shall be deleted.
(19) The following Sections 23C and 23d shall be inserted after
Section 23B.
“23C. Purchase of goods of under invoicing: (1) If any person
sells any goods by under invoicing, showing the selling
price lesser than the prevailing market price, the Tax
Officer shall, notwithstanding anything contained in the
laws in force, withhold the goods in stock similar to those
goods so under invoiced and sold and the Inland Revenue
Office may purchase or cause to be purchased the sam at
the price under invoiced and sold.
(2) If, in purchasing or caused to be purchased the
goods by the Department or Office pursuant to Sub-
section (1), such a person does not agree to sell the goods,
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the Department of office shall take such goods in its
custody, make calculation on the basis of the price at
which they were under invoiced and sold and make
payment when such a person shows up to receive
payment.
(3) The goods purchased or caused to be purchased
pursuant to Sub-sections (1) and (2) may be sold or
caused to be sold at such price and in accordance with
such procedures as may be specified by the Director
General.”
“23D. Power to make search, seizure or demand deposit or
security: (1) If the Tax Officer finds that any person, firm,
company or organization has done transaction by evading
tax and there is a possibility that the accused may go away
or the evidence and proof of offence may disappear, the
Tax Office may, with the approval of the Director General,
do or cause to be done any of the following acts:
(a) To seal the place of transaction,
(b) To demand cash deposit or wealth guarantee
in a sum equivalent to the tax evaded from
the person believed to have committed the
offence, by executing a memorandum to that
effect,
(2) The Tax Officer shall have the same powers as
the police may exercise under the laws in force in relation
to the investigation of offences pursuant to this Act.”
(20) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 25:
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“(1a) Notwithstanding anything contained in Sub-section
(1), a diplomatic body or diplomat on the purchase of taxable
goods or services shall not be refunded if the amount p rchase is
less than One Thousand Five Hundred Rupees at one time.”
(21) The following Sections 25A. shall be inserted after Section 25:
“25A. Refund of tax paid by foreign tourist on purchase: If a
foreign tourist visiting Nepal and returning by air
purchases taxable goods of more than Fifteen Thousand
Rupees and takes them with him or her, the tax paidon
such goods shall be refunded in accordance with the
procedures specified by the Department.
(22) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of interest
shall be Fifteen per cent per annum.”
(23) Of section 29
(a) The following Clause (c) shall be substituted for Clause
(c) of Sub-section (1):
“(c) In the event of violation of Sub-sections (1) and (4)
of Section 14, Five Thousand Rupees for each
instance fine including recover the liable tax.”
(b) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) In the event of lessening tax liability without
observing this Act or the Rules framed under this
Act, the Tax Officer may fine up to Twenty Five
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percent of the amount of tax, on the grounds as
specified by the Department.”
(c) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a person commits any of the following offences,
the Tax Officer may impose a fine of cent percent of
the amount of tax or an imprisonment up to Six
months or both the fine and the imprisonment on
such a person:
(a) Preparing false accounts, invoices or other
documents;
(b) Committing an evasion of tax by fraud;
(c) If an unregistered person acts as if he/she
were a registered person;
(d) Transaction in Infringing Section 30,
(e) Infringing Section 23c.
(24) The following Section 30A. shall be inserted after Section 30:
“30A. Power to order for reassessment of tax: (1) In cases
where, before tax is assessed, it appears from the
information given to the Director General that any action
relating to the assessment of tax is about to be irregular or
has been irregular, the Director General may, by executing
a memorandum clearly setting out the reasons, give
direction to the concerned Tax Officer to make
reassessment of tax or order any other Tax Officer to do
that act.
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(2) In cases where it appears that tax liability has
increased because of tax assessment made by the Tax
Officer recklessly or with mala fide intention, the Director
General may give order to amend such tax assessment
order within Four months after the date of initial t x
assessment.”
(25) The following Section 31A. shall be substituted for Section 31A:
“31A. Application may be made for administrative review:
(1) A person who is not satisfied with any decision of tax
assessment made by the Tax Officer may make an
application to the Department against the decision within
Thirty days of the date of receipt of a notice of that
decision.
(2) In cases where the time limit for making
application pursuant to Sub-section (1) expires andy
person makes an application for the extension of time l mit
within Seven days from the date of expiration of the ime
limit, the Department may extend the time limit for a
period not exceeding Thirty days from the date of
expiration of the time limit.
(3) If the claim of the applicant appears to be true
upon examining the evidence and documents including the
application made by the taxpayer pursuant to Sub-section
(1), the Director General may, by executing a
memorandum setting out the clear reasons, void that tax
assessment order and direct the concerned Tax Officer to
make re-assessment of tax or order any Tax Officer to do
that act.
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(4) The Department shall make decision on the
application within Sixty days after the date of making of
application pursuant to Sub-section (1).
(5) If the Department does not give decision within
the time limit as referred to in Sub-section (4), the
concerned person may make an appeal to the Revenue
Tribunal pursuant to Section 32.
(26) The following Section 32 shall be substituted for Section 32:
“32. Appeal in the Revenue Tribunal: (1) A person who is
not satisfied with an order of suspension made by the
Director General pursuant to Section 30 or a decision
made by the Department pursuant to Sub-section (4) of
Section 31A. may file an appeal in the Revenue Tribunal
according to the Revenue Tribunal Act, 2031.
(2) The person who files an appeal pursuant to
Sub-section (1) has to register a copy of the appeal with
the Department within Fifteen days of the date of filing
appeal.”
(27) The following Section 32A. shall be inserted after Section 32:
“32A. Advance ruling: (1) If any person makes an application in
writing to the Department for the removal of any
confusion as to the application of this Act, the Department
may issue its version by an advance ruling as prescribed,
by notifying the person in writing.
(2) Notwithstanding anything contained in Sub-
section (1), the Department shall not be entitled to issue
an advance ruling referred to in Sub-section (1) on any
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matter of confusion occurred in the implementation of this
Act in cases where such matter is sub judice in the court
or has already been decided by the court.
(28) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of
Nepal may obtain the service of the concerned expert for
the act related to tax auditing; and the provision
governmental secrecy mentioned in Section 37 shall also
apply to such an expert.”
(29) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 40:
“ (1) Award: A person who provides information, along with
evidence, showing that a taxpayer has evaded or attemp ed
to evade all or some portions of his or her tax liability may
be awarded, by a decision of the Director General, as
reward the amount that is equal to Twenty per cent of the
amount of tax recovered on the basis of that information."
(30) The following Section 40A and 40B shall be inserted after
Section 40:
40A. Rebate in fine: If a taxpayer, who has not submitted tax
details till the end of Ashad of year 2062 B.S., submits
remaining tax details and Twenty-Five percent of fine
within Twenty fifth day of Chaitra of 2062 B.S., the
rebate of Seventy Five percent in fine for not submitting
details shall be provided.
40B. Rebate in fees, interest and fine: If someone submits all
the renaming amount of tax to be paid till the end of
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Ashad 2062 B.S. and Twenty percent additional fees
pursuant to Section 19, interest pursuant to Section 26
and Fifty percent of interest and fine pursuant to Section
29 within Twenty fifth day of the Chaitra of 2062 B.S., a
rebate on remaining additional fees, interest and fine shall
be provided.
(31) The following Schedule-1 and Schedule-2 shall be substituted
for Schedule-1 and Schedule-2:
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“ Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice, wheat, maize, barley, millet, buckwheat, pulses,
flour, rye flour, grains, peas, chickpeas, kidney p as, beans and
similar basic unprocessed food materials and their extracts.
(b) Green and fresh vegetable, fresh fruits, fresh eggs, tuberous roots,
and fruits, vegetables and as use in vegetable and tuberous roots,
fresh and unprocessed agro-products. (Except those t be
supplied hotels, restaurants, bars, guest houses, cafeteria and
other similar organizations).
(c) Unprocessed cash crops/cereals (such as sugarcane, cotton,
cardamom, ginger and saffron, flax, unprocessed tobacco shall be
sold by farmers, tea leaf, proved orthodox tea producing using
biological fertilizer, packing of tea (tea chest), seed of coffee,
soybean, ground-nuts, rape-seed, mustard seed, sarsyu seed,
sunflower seed, sesamum seed) and oil-cake.
(d) Herbs (including their extracts).
Group 2. Goods of Basic Needs:
(a) Piped water, including water supplied by tankers.
(b) Wood and coal.
(c) Kerosene (Except fuel of aircraft).
(d) Salt.
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Group 3. Live Animals and animal products
(a) Goats, sheep and mountain goats , yak and buffalos , bore and
pigs , rabbit and other such animal and their unprocessed raw
edible food items.
(b) Cows and she buffalos, she goats, and their fresh milk, (including
pasteurized), Fresh curd, bees and bee hives.
(c) Ducks, hens, cocks, turkey and similar other birds their fresh
meat and unprocessed raw items and eggs.
(d) Fresh or dried fish (except other than packed).
4. Agricultural inputs
(a) Crops, grasses, flowers or live trees and other plants, bulbs,
tubers, tuberous roots and bulbs and roots used as seeds.
(b) Manure, fertilizer and soil conditioners.
(c) Tools used in agriculture : Hand tools, mattocks, picks, forks
and rakes, axes, bill hooks and similar hewing tools, secateurs of
any kind, scythes, sickles, hay knives, other than d saws,
hedge shears, timber wedges, ploughshare and other tools of a
kind used in agriculture.
(d) Insecticides, fully or partially used only for crops.
(e) Use in agriculture function Tractors, cultivators, tantalum,
levelers, harvesting or threshing machine, threshers, fishing nets,
to Eight horse power up to pumping sets and up to 30 meters
hose pipe.
(f) Utensils for feeding poultry feed, box for chicken (challa), and
crate for keeping egg.
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(g) Feed and ingredient of feed supplements.
Group 5. Medicine, Medical and Similar Health services
(a) Medical or surgical services provided by health institution
operated in Government ownership.
(b) Human blood and human blood items and vaccines.
(c) Human or animal organs or tissue for medical research.
(d) Medicaments for treatment of livestock and human beings and
family planning means.
(e) Pacemakers used in treatment of heart diseases, stint, valve of
heart, goods made for, and suitable only for the us of, infirm
and disabled persons.
(f) X-ray film and oxygen gas to be used for treatment.
(g) Raw material purchased or imported by the medicine industries
to the extent approved by the Department of Drug Management.
Group 6: Education
(a) Research related acts in schools or universities
(b) Getting purpose for non-profit, Vocational or professional
trainings or refresher trainings,
(c) Educational services provided by schools and universities.
Group 7: Books, newspapers and printed materials
(a) Books, newsletters and printing and publication hereof,
(b) Newsprint.
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Group 8: Artistic and cultural goods and services, carving services
(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programs,
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
Group 9: Passengers and goods transportation services
Air transport, non tourist passenger transportation (except cabal car)
and goods carrier service (except transportation related to supply).
Group 10: Personal or Professional service:
Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually.
Group 11: Other goods or services:
1. Postal services (only those provided by the Governm nt of Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets.
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packet.
(c) Postage stamp.
2. Excise duty stamp.
3. Financial and insurance services.
4. Bank notes and cheque books:
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(a) Printing and issue of bank notes.
(b) Supply of bank notes from foreign countries into Nepal.
(c) Cheque books.
5. Gold and silver:
(a) Gold, gold coins and gold ornaments.
(b) Silver, silver coins (Except others silver ready-made goods
and ornaments).
6. Electricity.
7. Raw wool.
8. Battery operated tempo and their chassis and Battery.
9. Bio-gas, solar power and wind power operated machine and
equipments recommended by Alternate Energy Center.
10. Aircrafts, helicopters, fire engine (Damcal), ambulances,
11. Jute products.
12. Industries and machine up to 5 percent customs duty as falling
under Part 84 of the Customs Tariff.
13. Woolen carpet and woolen carpet weaving, dying, washing and
knitting.
14. Cotton sari, Lungi, Dhoti (for both men and women) and
Gamcha.
15. Cotton thread (Sub-heading no of custom 5205 and 5207).
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16. Woolen yarn used in domestic hand kittening of sweater (except
artificial and acrylic).
17. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
18. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
19. The value added tax collected by textile or match (only wooden
stick) industries shall be refunded to those industries as
prescribed by Government of Nepal. Twenty Five percent tax
shall be refunded from own collected tax for mustard oil, flour
and incense producing industries
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the
services provided by such entities carrying on business such as
hotels and guest houses)
Group 13: Betting, casinos and lotteries
Activities relating to facilities provided for the organization of
bets or gambling, and lottery.
Note:
The Department, as prescribed, and in consultation w th the Department
of Customs, interpretation of the goods and services enjoying tax
emption and the Harmonized Code of Commodities as necessary.

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Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. Goods and services purchased or imported by His Majesty the King, His
Majesty the Queen, His Royal Highness the Crown Price and other
members of the Royal family.
2. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
3. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
4. Goods or services imported by a person or mission enjoying diplomatic
facility and a person serving in a diplomatic mission enjoying tariff
facility, on the recommendation of the Ministry of Foreign Affairs,
Government of Nepal.

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5. Zero rate facility shall be available to medicine dustries if the industry
desires for such a facility.
6. If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
shall be provided on such supplies, so long as suchtreaty or agreement
is in effect.
7. Commodities supplied for the propose of export t the export house
which is so prescribed by the Government of Nepal and earns
convertible foreign currency upon exporting all commodities.

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Revenue Related Some Nepal Acts (Amendment) Ordinance,
2062 (2005)
Date of Authentication and Publication
2062.6.16 (2 Oct 2005)

Ordinance number 34 of the year 2062
Revenue Related Some Nepal Acts (Amendment) Ordinance
Preamble: Whereas, it is expedient to amend Revenue Related Some Nepal
Acts and at the moment Parliament is not in session;
Now, therefore, be it enacted by His Majesty the King Gyanendra Bir
Bikram Shah Dev., in accordance with Article 72 of Constitution Kingdom of
Nepal, 2047(1990).
1. Short title and commencement: (1) This Ordinance may be called
“Revenue Related Some Nepal Acts (Amendment) Ordinance, 2062
(2005)"
(2) This ordinance shall come into force immediately.
2. Amendment to Value-added Tax Act, 2052 (1996): Of Value-
added Tax Act, 2052 (1996),-
(1) The following proviso shall be substituted provis of Section 9:
Provided that, that if a small vendor wishes to have his or
her transaction registered voluntarily, he or she may have such
registration after completing the procedures as refer d to in
Section 10.”
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(2) Of Section 10,-
(a) The following Sub-sections (1) and (2) shall be
substituted for Sub-sections (1) and (2):
“(1) A person who intends to be engaged in any
transactions has to make an application, in the prescribed
format, to the Tax Officer, for registration, prior to
commencing the transactions.
(2) If any goods transacted by a person is taxable or
if any person operates of hardware, sanitary, furnit e,
fixture, furnishing, automobiles, electronics, marble, and
color lab transactions within a Municipal Corporation,
Sub-municipal Corporation, Municipality or Depart or
within an area specified by the Department, the person has
to make an application in the prescribed format, to he Tax
Officer, for registration, within Thirty days after the date of
imposition of such tax or the date of commencement of the
transactions.”
(b) The word “application” shall be substituted forthe word
“petition” contained in Sub-section (4).
(3) The following Section 10A. Shall be inserted after Section 10:
10A. Declaration of Stock: (1) A taxpayer may declare the
actual stock of the taxable goods under his/her possession
till the end of Magh of the year 2062 B.S.
(2) If a taxpayer declares the stock pursuant to
Sub-section (1) in a format as prescribed by the
Department, he/she shall deposit Nine percent amount f
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declared goods as a tax and an amount equal to prevailing
custom duty as a fine.
(3) While declaring a stock pursuant to Sub-section
(1), a taxpayer shall not be entitled to set additional price
to any goods than prevailing price at the time of
declaration of stock.
(4) A taxpayer shall be entitled to get tax reduction
pursuant to Section 17 to the tax amount of the goods
declared as stock pursuant to Sub-section (1).
(5) If the quantity of stock or price of goods
declared by a taxpayer pursuant to Sub-section (1) deems
unnatural, the tax officer may conduct inquiry of the stock
upon showing the grounds and reasons therefor and if it is
seems from the inquiry that goods are found to be sold in
the lower than that of declared price, such sale shall not
be recognized for the purpose of tax assessment.
(6) The quantity, price and source declared by a
taxpayer pursuant to this Section shall not proceed by any
institution (agency) for the purpose of tax.
(4) The following Sub-sections (4) shall be substituted for Sub-
section (4) of Section 14:
“(4) One who transports goods attracting tax of more than
Ten Thousand Rupees outside the area specified by the
Department shall hold tax invoices with him/her.”
(5) The following Clause (b1) shall be inserted after Clause (b) of
Sub-section (1) of Section 29:
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“(b1) In the event of violation of Section 10A, additional cent
percent of tax in different price.”
(6) The following Section 40c shall be inserted after Sction
40B:
40C. Not levying Fine on fees: Notwithstanding anything
contained elsewhere in this Act, if the burden of tax seems
different but not the tax recovery amount by the reason of
interpretation or decision made under this Act or Rules
framed hereunder, fine on fees shall not be levied b fore
the such interpretation or decision is made.
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Financial Ordinance, 2062 (2005)
Date of Authentication and Publication
2062.10.1(14 Jananuary2005)

Ordinance number 49 of the year 2062
An Ordinance Made to Implement Proposals Relating to Finance of
the Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal and at the moment Parliament is not in
session;
Now, therefore, be it enacted by His Majesty the King Gyanendra Bir
Bikram Shah Dev, in accordance with Article 72 of Constitution kingdom of
Nepal, 2047(1990).
1. Short title and commencement: (1) This Ordinance may be called as
the “Financial Ordinance, 2062 (2005)."
(2) This ordinance come into force immediately.
24. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) The following Clause (t) shall be substituted for Clause (t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax Officer and
the Chief Tax Administrator appointed by the Governme t
of Nepal for the purpose of this Act, and this term
includes a section office, director and deputy director at
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the Department or such other officer designated by the
Government of Nepal authorizing to exercise the powers
of Tax Officer under this Act.”
(2) The following Section 4 shall be substituted for Section 4:
“4. Jurisdiction of the Tax Officer: (1) The jurisdiction of
Tax Officer shall be as prescribed by the Government of
Nepal.
(2) The Director General may also so designate a
Tax Office as to inspect and monitor also the transaction
of taxpayers in other areas than those falling under his or
her jurisdiction.”
(5) The following Section 5A. shall be substituted for Section 5A:
“5A. Tax not to be levied on transfer of ownership of
transactions: Notwithstanding anything contained
elsewhere in this Act, in cases where a registered person
sells the transaction being carried out by him or her to any
other registered person or the transaction is transferred in
the name of his or her heir by virtue of death, such transfer
of ownership shall not be subject to tax. The person
registered in so selling or transferring the transaction shall
give information thereof to the Department as prescribed.
Provided that, the registered person who has
purchased such transaction shall bear the liability of tax of
the predecessor.
(4) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
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“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of Thirteen percent.”
(5) The following Section 8A. shall be inserted after Section 8:
“8A. Provision of bank guarantee: (1) A productive industry
that exports more than ninety percent of the total sale of
the last Twelve months after minimum Twenty percent
value added, raw materials or subsidiary raw materil
required to produce the goods in the quantity of import to
be imported by furnishing a bank guarantee.
(2) in order to export making finished goods from
the raw materials and subsidiary raw material, with
minimum Ten percent value addition in price of
transaction prescribed by Custom.
(3) Duty free shop may furnish value added tax as
bank guarantee of tax liable in export goods through a
bonded warehouse. (4) The bank guarantee furnished
pursuant to Sub-section (1) or (3) and process of its
release shall be as accordance with the procedures
prescribed by the Department.
Provided that, in the case of garment export
industry the concerned custom office, in the
recommendation of Inland Revenue Department, shall
permit export upon accepting the bank guarantee.
(5) A person who enjoys the facility as referred to
in this Section shall not be entitled to the facility as
referred to in Sub-section (4) of Section 24.”
(6) The following Section 9 shall be substituted for Section 9:
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“9. Exemption for small vendor: Notwithstanding anything
contained in the other provisions of this Act, an exemption
may be provided to a small vendor, having a prescribed
annual taxable transaction threshold, from the
requirements of registration and filing of tax returns and
from such requirements as may be prescribed.
Provided that, that if a small vendor wishes to have
his or her transaction registered voluntarily, he or she may
have such registration after completing the procedur s as
referred to in Section 10.”
This provision shall not be applicable In a case of
organizing exhibition, fair or other such transactions. In
the case of such registration the Tax Officer may cll
security a guarantee.
(7) Of Section 10,-
(a) The following Sub-sections (1) and (2) shall be
substituted for Sub-sections (1) and (2):
“(1) A person who intends to be engaged in any
transactions has to make an application, in the prescribed
format, to the Tax Officer, for registration, prior to
commencing the transactions.
(2) If any goods transacted by a person is taxable or
if any person operates of hardware, sanitary, furnit e,
fixture, furnishing, automobiles, electronics, marble, and
color lab transactions within a Municipal Corporation,
Sub-municipal Corporation, Municipality or Depart or
within an area specified by the Department, the person has
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to make an application in the prescribed format, to he Tax
Officer, for registration, within Thirty days after the date of
imposition of such tax or the date of commencement of the
transactions.”
(b) The word “application” shall be substituted forthe word
“petition” contained in Sub-section (4).
(8) Amendment of Section 10A :
10A.Declaration of Stock: (1) A taxpayer may declare the
actual stock of the taxable goods under his/her possession
till the last day of Magh of the year 2062 B.S.

(2) If a taxpayer declares the stock pursuant to Sub-
section (1) in a format as prescribed by the Departmen ,
he/she shall deposit Nine percent amount of the cost of
declared goods as a tax and an amount equal to prevailing
custom duty as a fine.
(3) While declaring a stock pursuant to Sub-section
(1), a taxpayer shall not be entitled to set additional price
to any goods than prevailing market price at the time of
declaration of stock.
(4) A taxpayer shall be entitled to get tax reduction
subject to Section 17 to the tax amount of the goods
declared as stock pursuant to Sub-section (1).
(5) If the quantity of stock or price of goods
declared by a taxpayer pursuant to Sub-section (1) deems
unnatural (not real), the tax officer may conduct inquiry of
the stock upon showing the grounds and reasons thereto
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and if it seems from the inquiry that goods are found to be
sold in the lower price than that of the declared price,
such sale shall not be recognized for the purpose of tax
assessment.
(6) The importer, who opens letter of credit
(Pratitpatra) within the last day of Paush of the year
2062 B.S., shall declare the difference price in the Custom
point within the last day of the Chaitra of the year 2062
B.S.
(7) The quantity, price and source declared by a
taxpayer pursuant to this Section shall not be liable to
institute any action by an institution (agency) for the
purpose of tax.
(9) The following Clause (c) shall be substituted for Clause (c) of
Sub-section (1) of Section 11:
“(c) In the case of a partnership firm, if such partnership firm is
dissolved or the partner dies,”
(10) The following Clause (d1) shall be inserted after Clause (d) of
Sub-section (1) of Section 11:
“(d1) If the taxpayer is one who gives zero return o does not
give return at all within a consecutive period of One
year,”
(11) The following Section 12A. Shall be inserted after Section 12:
“12A. Taxable value of timber transaction: (1) There shall be
levied and collected tax on the amount of royalty of the
timber of national forest or the amount of auction,
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whichever is higher, at the time of auction, release or saw
order, whichever is earlier.
(2) If the timber of a personal cultivated, private
forest or community forest for business purpose and
despite that royalty is not chargeable, tax shall be eviable
as if it were the timber of national forest.”
(12) Of Section 14,-
(a) The following proviso shall be inserted in Sub-section (1):
“Provided that, a person who carries on annual
transaction of more than One Million Rupees shall issue
invoices with serial number and permanent accounts
number as well as his or her name, and address despite
that he or she is not registered.”
(b) The following Sub-sections (4) and (5) shall be inserted
after Sub-section (3):
“(4) A person who purchases goods or service worth
more than Ten Thousand Rupees for commercial purpose
is required to take an invoice from the registered p rson.
The invoice shall be kept with while transporting such
goods.
(5) The Department may order taxpayers to issue
invoices by using a cash machine or computer. Procedures
of such order shall be as prescribed by the Directo
General.
(6) The Government of Nepal may, by publishing a
notice in Nepal Gazette, so specify that any person
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specified by such a notice has to make public the retail
sale value or price of any such goods as specified in that
notice for such period as specified therein.
(7) Provision shall be made that any person
specified pursuant to Sub-section (6) shall, in selling such
goods to any unregistered persons, have to issue invoices
of the price made public in the specified format and
collect also the tax at the consumer level.
Provided that, any persons not so specified
pursuant to Sub-section (6) may issue invoices as referred
to in this Sub-section.”
(13) The following Sub-section (3) shall be inserted after Sub-section
(2) of Section 15:
“(3) Notwithstanding anything contained in Sub-sections
(1) and (2), a Local Body or Government of Nepal shall ave to
collect or recover tax at the time of sale of taxable goods or
services.
(14) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 16:
“(1a) The Department may have continuous access to the
computer (database) of taxpayers.”
(15) The following Section 16B. shall be inserted after Section 16A:
“16B. Deduction of tax paid on goods in the event of loss: In
the event of loss and damage due to arson, theft, accident,
wear and tear or expired the date of uses goods of value
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added tax paid on the goods shall be deducted as
prescribed.”
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(16) Of Section 17,-
(a) The words "high price" shall be deleted contained in
Clause (d) of Sub-section (2).
(b) The following Sub-section (5a) shall be substituted for
Sub-section (5a):
“(5a) The concerned taxpayer shall be allowed to
deduct tax paid on the capital goods that were imported or
purchased by entering into a loan agreement under
financial lease subject to Sub-section (2).”
(c) The following Sub-section (5b) shall be inserted after
Sub-section (5a):
“(5b) The concerned taxpayer shall be allowed to
deduct tax paid pursuant to Section 12A. and Sub-section
(3) of Section 15.”
(d) The following Sub-section (8) and (9) shall be inserted
after Sub-section (7):
“(8) Notwithstanding anything contained
elsewhere in this Section, the name of a taxpayer who
does not submit the tax returns for Six months
consecutively shall be made public, and if there is any
amount due for tax deduction by such a taxpayer, such
amount may be suspended and his/ her registration may
also be suspended.”
(9) Office gives information to tax payer about
those taxpayers whose registration is suspended pursuant
to Sub-section (8) and after getting such information, an
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customer who brought goods or service from such
taxpayer, those tax could no refund or reduce
(17) Of Section 18,-
(a) The words “or by registered post” shall be inserted after
the words “before the Tax Officer” contained in Sub-
section (1).
(b) The following Sub-sections (1a) shall be inserted after
Sub-section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), a taxpayer in a district where there is no
Inland Revenue Office may furnish the amount of tax
returns to be paid and submitted by him/her with the
Office of Funds and Accounts Controller of the same
district within the Fifteenth day of the month in which
he/she has to furnish the tax returns paying the tax. The
Office of Funds and Accounts Controller shall forwad the
returns of tax and payment of tax so received to the Inland
Revenue Office within Seven days.”
(19) Of Section 19,-
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a taxpayer does not pay the tax within the
time limit specified in Sub-section (1), an extra charge of
Ten percent per annum shall be imposed on the amount of
tax due and outstanding.”
(b) Sub-section (3) shall be deleted.
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(c) The word and number “or (3)” shall be deleted contained
in Sub-section (4).
(d) The word and number “or (3)” shall be deleted contained
in Sub-section (5).
(20) The following Sub-section (4) shall be substituted for Sub-
section (4) then inserted Sub-section (4a) of Section 20:
“(4) In assessing the tax pursuant to Sub-section (1), tax
assessment shall have to be made within Four years from the date
of submission of the tax returns. If the tax assessm nt cannot be
made within that period, the returns so filed shall ipso facto be
considered to be valid.”
“(4a) Notwithstanding anything contained in Sub-section
(4), where any person has evaded tax by preparing false accounts
or invoices or other documents or by fraud, the Department may
at any time issue an order for the reassessment of tax.”
(21) Sub-section (2) of Section 21 shall be deleted.
(22) The following Sections 23C and 23d shall be inserted after
Section 23B.
“23C. Purchase of goods of under invoicing: (1) If any person
sells any goods by under invoicing, showing the selling
price lesser than the prevailing market price, the Tax
Officer shall, notwithstanding anything contained in the
laws in force, withhold the goods in stock similar to those
goods so under invoiced and sold and the Inland Revenue
Office may purchase or cause to be purchased the sam at
the price under invoiced and sold.
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(2) If, in purchasing or caused to be purchased the
goods by the Department or Office pursuant to Sub-
section (1), such a person does not agree to sell the goods,
the Department of office shall take such goods in its
custody, make calculation on the basis of the price at
which they were under invoiced and sold and make
payment when such a person shows up to receive
payment.
(3) The goods purchased or caused to be purchased
pursuant to Sub-sections (1) and (2) may be sold or
caused to be sold at such price and in accordance with
such procedures as may be specified by the Director
General.”
“23D. Power to make search, seizure or demand deposit or
security: (1) If the Tax Officer finds that any person, firm,
company or organization has done transaction by evading
tax and there is a possibility that the accused may go away
or the evidence and proof of offence may disappear, the
Tax Office may, with the approval of the Director General,
do or cause to be done any of the following acts:
(a) To seal the place of transaction,
(b) To demand cash deposit or wealth guarantee
in a sum equivalent to the tax evaded from
the person believed to have committed the
offence, by executing a memorandum to that
effect,
(2) The Tax Officer shall have the same powers as
the police may exercise under the laws in force in relation
to the investigation of offences pursuant to this Act.”
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(23) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 25:
“(1a) Notwithstanding anything contained in Sub-section
(1), a diplomatic body or diplomat on the purchase of taxable
goods or services shall not be refunded if the amount p rchase is
less than One Thousand Five Hundred Rupees at one time.”
(24) The following Sections 25A. shall be inserted after Section 25:
“25A. Refund of tax paid by foreign tourist on purchase: If a
foreign tourist visiting Nepal and returning by air
purchases taxable goods of more than Fifteen Thousand
Rupees and takes them with him or her, the tax paidon
such goods shall be refunded in accordance with the
procedures specified by the Department.
(25) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of interest
shall be Fifteen per cent per annum.”
(26) Of section 29
(a) The following Clause (b1) and (b2) shall be inserted after
Clause (b) of Sub-section (1):
(b1) In the event of violation of Section 10A, additional
cent percent of tax in different price.”
(b2) In the event of failure to place a tax board in
accordance with this Act or the Rules framed under
this Act, a fine of Two Thousand Rupees for each
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week and in the event of failure to place it at the
designate place, a fine of One Thousand Rupees.”

(b) The following Clause (c) shall be substituted for Clause
(c) of Sub-section (1):
“(c) In the event of violation of Sub-sections (1) and (4)
of Section 14, Five Thousand Rupees for each
instance fine including recover the liable tax.”
(c) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) In the event of lessening tax liability without
observing this Act or the Rules framed under this
Act, the Tax Officer may fine up to Twenty Five
percent of the amount of tax, on the grounds as
specified by the Department.”
(d) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a person commits any of the following offences,
the Tax Officer may impose a fine of cent percent of
the amount of tax or an imprisonment up to Six
months or both the fine and the imprisonment on
such a person:
(a) Preparing false accounts, invoices or other
documents;
(b) Committing an evasion of tax by fraud;
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(c) If an unregistered person acts as if he/she
were a registered person;
(d) Transaction in Infringing Section 30,
(e) Infringing Section 23c.
(27) The following Section 30A. shall be inserted after Section 30:
“30A. Power to order for reassessment of tax: (1) In cases
where, before tax is assessed, it appears from the
information given to the Director General that any action
relating to the assessment of tax is about to be irregular or
has been irregular, the Director General may, by executing
a memorandum clearly setting out the reasons, give
direction to the concerned Tax Officer to make
reassessment of tax or order any other Tax Officer to do
that act.
(2) In cases where it appears that tax liability has
increased because of tax assessment made by the Tax
Officer recklessly or with mala fide intention, the Director
General may give order to amend such tax assessment
order within Four months after the date of initial t x
assessment.”
(28) The following Section 31A. shall be substituted for Section 31A:
“31A. Application may be made for administrative review:
(1) A person who is not satisfied with any decision of tax
assessment made by the Tax Officer may make an
application to the Department against the decision within
Thirty days of the date of receipt of a notice of that
decision.
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(2) In cases where the time limit for making
application pursuant to Sub-section (1) expires andy
person makes an application for the extension of time l mit
within Seven days from the date of expiration of the ime
limit, the Department may extend the time limit for a
period not exceeding Thirty days from the date of
expiration of the time limit.
(3) If the claim of the applicant appears to be true
upon examining the evidence and documents including the
application made by the taxpayer pursuant to Sub-section
(1), the Director General may, by executing a
memorandum setting out the clear reasons, void that tax
assessment order and direct the concerned Tax Officer to
make re-assessment of tax or order any Tax Officer to do
that act.
(4) The Department shall make decision on the
application within Sixty days after the date of making of
application pursuant to Sub-section (1).
(5) If the Department does not give decision within
the time limit as referred to in Sub-section (4), the
concerned person may make an appeal to the Revenue
Tribunal pursuant to Section 32.
(29) The following Section 32 shall be substituted for Section 32:
“32. Appeal in the Revenue Tribunal: (1) A person who is
not satisfied with an order of suspension made by the
Director General pursuant to Section 30 or a decision
made by the Department pursuant to Sub-section (4) of
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Section 31A. may file an appeal in the Revenue Tribunal
according to the Revenue Tribunal Act, 2031.
(2) The person who files an appeal pursuant to
Sub-section (1) has to register a copy of the appeal with
the Department within Fifteen days of the date of filing
appeal.”
(30) The following Section 32A. shall be inserted after Section 32:
“32A. Advance ruling: (1) If any person makes an application in
writing to the Department for the removal of any
confusion as to the application of this Act, the Department
may issue its version by an advance ruling as prescribed,
by notifying the person in writing.
(2)Notwithstanding anything contained in Sub-
section (1), the Department shall not be entitled to issue
an advance ruling referred to in Sub-section (1) on any
matter of confusion occurred in the implementation of this
Act in cases where such matter is sub judice in the court
or has already been decided by the court.
(31) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of
Nepal may obtain the service of the concerned expert for
the act related to tax auditing; and the provision
governmental secrecy mentioned in Section 37 shall also
apply to such an expert.”
(32) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 40:
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“(1) Award: A person who provides information, along with
evidence, showing that a taxpayer has evaded or attemp ed
to evade all or some portions of his or her tax liability may
be awarded, by a decision of the Director General, as
reward the amount that is equal to Twenty per cent of the
amount of tax recovered on the basis of that information."
(33) The following Section 40A, 40B and 40c shall be inserted after
Section 40:
40A. Rebate in fine: If a taxpayer, who has not submitted tax
details till the end of Ashad of year 2062 B.S., submits
remaining tax details and Twenty-Five percent of fine
within Twenty fifth day of Chaitra of 2062 B.S., the
rebate of Seventy Five percent in fine for not submitting
details shall be provided.
40B. Rebate in fees, interest and fine: If someone submits all
the renaming amount of tax to be paid till the end of
Ashad 2062 B.S. and Twenty percent additional fees
pursuant to Section 19, interest pursuant to Section 26
and Fifty percent of interest and fine pursuant to Section
29 within Twenty Fifth day of the Chaitra of 2062 B.S., a
rebate on remaining additional fees, interest and fine shall
be provided.
40C. Not levying Fine on fees: Notwithstanding anything
contained elsewhere in this Act, if the burden of tax seems
different but not the tax recovery amount by the reason of
interpretation or decision made under this Act or Rules
framed hereunder, fine on fees shall not be levied b fore
the such interpretation or decision is made.
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(34) The following Schedule-1 and Schedule-2 shall be substituted
for Schedule-1 and Schedule-2:
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“ Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice, wheat, maize, barley, millet, buckwheat, pulses,
flour, rye flour, grains, peas, chickpeas, kidney p as, beans and
similar basic unprocessed food materials and their extracts.
(b) Green and fresh vegetable, fresh fruits, fresh eggs, tuberous roots,
and fruits, vegetables and as use in vegetable and tuberous roots,
fresh and unprocessed agro-products. (Except those t be
supplied hotels, restaurants, bars, guest houses, cafeteria and
other similar organizations).
(c) Unprocessed cash crops/cereals (such as sugarcane, cotton,
cardamom, ginger and saffron, flax, unprocessed tobacco shall be
sold by farmers, tea leaf, proved orthodox tea producing using
biological fertilizer, packing of tea (tea chest), seed of coffee,
soybean, ground-nuts, and oil-cake.
(d) Herbs (including their extracts).
Group 2. Goods of Basic Needs:
(a) Piped water, including water supplied by tankers.
(b) Wood and coal.
(c) Salt.
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Group 3. Live Animals and animal products
(a) Goats, sheep and mountain goats , yak and buffalos , bore and
pigs , rabbit and other such animal and their unprocessed raw
edible food items .
(b) Cows and she buffalos, she goats, and their fresh milk, (including
pasteurized), Fresh curd, bees and bee hives.
(c) Ducks, hens, cocks, turkey and similar other birds their fresh
meat and unprocessed raw items and eggs.
(d) Fresh or dried fish (except other than packed).
4. Agricultural inputs
(a) Crops, grasses, flowers or live trees and other plants, bulbs,
tubers, tuberous roots and bulbs and roots used as seeds
(b) Manure, fertilizer and soil conditioners.
(c) Tools used in agriculture : Hand tools, mattocks, picks, forks
and rakes, axes, bill hooks and similar hewing tools, secateurs of
any kind, scythes, sickles, hay knives, other than d saws,
hedge shears, timber wedges, ploughshare and other tools of a
kind used in agriculture.
(d) Insecticides, fully or partially used only for crops.
(e) Use in agriculture function Tractors, cultivators, tantalum,
levelers, harvesting or threshing machine, threshers, fishing nets,
to Eight horse power up to pumping sets and up to 30 meters
hose pipe.
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(f) Utensils for feeding poultry feed, box for chicken (challa), and
crate for keeping egg.
(g) Feed and ingredient of feed supplements.
Group 5. Medicine, Medical and Similar Health services
(a) Health service.
(b) Human blood and human blood items and vaccines.
(c) Human or animal organs or tissue for medical research.
(d) Medicaments for treatment of livestock and human beings and
family planning means.
(e) Pacemakers used in treatment of heart diseases, stint, valve of
heart, goods made for, and suitable only for the us of, infirm
and disabled persons.
(f) X-ray film and oxygen gas, bandage to be used for treatment.
(g) Raw material, subsidiary raw material and packing goods
purchased or imported by the medicine industries to the extent
approved by the Department of Drug Management.
Group 6: Education
(a) Research related acts in schools or universities.
(b) Getting purpose for non-profit, Vocational or professional
trainings or refresher trainings.
(c) Educational services provided by schools and uiversities.
Group 7: Books, newspapers and printed materials
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(a) Books, calendar, newsletters and printing and publication
thereof.
(b) Newsprint.
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Group 8: Artistic and cultural goods and services, carving services
(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programs.
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
Group 9: Passengers and goods transportation services
Air transport.
Group 10: Personal or Professional service:
Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually, and
services of supplying human resources to foreign countries.
Group 11: Other goods or services:
1. Postal services (only those provided by the Governm nt of
Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets.
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packets.
(c) Postage stamps.
2. Excise duty stamp.
3. Financial and insurance services.
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4. Bank notes and cheque books:
(a) Printing and issue of bank notes.
(b) Supply of bank notes from foreign countries into Nepal.
(c) Cheque books.
5. Gold and silver:
(a) Gold, gold coins and gold ornaments.
(b) Silver, silver coins (Except others silver ready-made goods
and ornaments).
6. Electricity supply of 440, 220 volt.
7. Raw wool.
8. Battery operated tempo and their chassis and Battery.
9. Bio-gas, solar power and wind power operated machine and
equipments recommended by Alternate Energy Center.
10. Aircrafts, helicopters, fire engine (Damcal), ambulances.
11. Jute products.
12. Industries and machine up to 5 percent customs duty as falling
under Part 84 of the Customs Tariff.
13. Woolen carpet and woolen carpet weaving, dying, washing and
knitting and other threat shall be used by woolen, carpet
industry.
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14. In Cent percent Cotton sari, Lungi, Dhoti (for both men and
women) and Gamcha proved by professional institutions,
prescribed by department.
15. Woolen yarn used in domestic hand kittening of sweater (except
artificial and acrylic).
16. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
17. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
18. The value added tax collected by tire, textile, dot pen, match
(only wooden stick) industries shall be refunded to those
industries as prescribed by Government of Nepal. Twenty Five
percent tax shall be refunded from own collected tax for flour
and incense producing industries.
19. The tax paid by the textile industry on subsidiary raw materials,
domestic raw materials and machinery spare parts or ax paid by
woolen carpet industry on subsidiary raw materials or the tax
paid by production industry on raw materials or subsidiary raw
materials shall be refunded as a whole as prescribed y
Government of Nepal.
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the
services provided by such entities carrying on business such as
hotels and guest houses)
Group 13: Betting, casinos and lotteries
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Activities relating to facilities provided for the organization of
bets or gambling, and lottery.
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Note:
The Department, as prescribed, and in consultation w th the Department
of Customs, interpretation of the goods and services enjoying tax
emption and the Harmonized Code of Commodities as necessary.

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Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. Goods and services purchased or imported by His Majesty the King, His
Majesty the Queen, His Royal Highness the Crown Price and other
members of the Royal family.
2. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
3. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
4. Goods or services imported by a person or mission enjoying diplomatic
facility and a person serving in a diplomatic mission enjoying tariff
facility, on the recommendation of the Ministry of Foreign Affairs,
Government of Nepal.
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5 If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
shall be provided on such supplies, so long as suchtreaty or agreement
is in effect
6. Commodities supplied for the propose of export t the export house
which is so prescribed by the Government of Nepal and earns
convertible foreign currency upon exporting all commodities.
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Financial Act, 2063 (2006)
Date of Authentication and Publication
2063.7.20 (6 Nov. 2006)

Act number 12 of the year 2063 (2006)
An Act Made to Implement Proposals Relating to Finance of the
Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal;
Now, therefore, be it enacted by the House of Representatives in the
First Year of the issuance of the Proclamation of the House of Representatives,
2063 (2006).
1. Short title and commencement: (1) This Act may be called as the
“Financial Act, 2063 (2006)."
(2) Sections 1, 2, 3, 4, 5, 9 and 18 of this Act shall be deemed to
have come into force on 28 Ashad 2063 (12 July 2006) and the other
Sections on 1 Shrawan 2063(17 July 2006).
28. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) Of Section 2,-
(a) The following Clause (f1) shall be inserted after Clause
(f):
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“(f1) “Group of companies or entities” means a group of
companies or entities in relation to which the
following situation exists:
(a) If any business is carried on by a person or
agent member associated with the group of
entities,
(b) If any goods or services are supplied by the
group of entities to any entity or group of
other entities associated with it,
(c) If any goods or services are supplied to the
group of entity or member of the group,
(d) If the permanent address of operation of
business of any two or more than two
entitles is in the same place, or
(e) If the group of entities is controlled directly
or indirectly by any one person or some
persons.”
(b) The following Clause (h) shall be substituted for Clause
(h):
“(h) "Consideration" means anything to be obtained in
exchange for the price of any goods or services
being supplied.”
(c) The following Clause (h1) shall be inserted after Clause
(h):
“(h1) "Loan agreement" means a hire purchase agreement
or financial lease.”
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(d) The following Clause (t) shall be substituted for Clause
(t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax
Officer and the Chief Tax Administrator appointed
by the Government of Nepal for the purpose of this
Act, and this term includes a section office, director
and deputy director at the Department or such
other officer designated by the Government of
Nepal authorizing to exercise the powers of Tax
Officer under this Act.”
(2) The following Section 4 shall be substituted for Section 4:
“4. Jurisdiction of the Tax Officer: (1) The jurisdiction of
Tax Officer shall be as prescribed by the Government of
Nepal.
(2) The Director General of Department may also
so designate a Tax Office as to inspect and monitor also
the transaction of taxpayers in other areas than those
falling under his or her jurisdiction.”
(3) The following Section 5A. shall be substituted for Section 5A:
“5A. Tax not to be levied on transfer of ownership of
transactions: Notwithstanding anything contained
elsewhere in this Act, in cases where a registered person
sells the transaction being carried out by him or her to any
other registered person or the transaction is transferred in
the name of his or her heir by virtue of death, such transfer
of ownership shall not be subject to tax. The person
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registered in so selling or transferring the transaction shall
give information thereof to the Department as prescribed.
(2) Notwithstanding anything contained in Sub-
section (1), if any industry or business that is required to
be registered or has been registered pursuant to laws is
transferred, the transferee who obtains the ownership shall
bear the transferor’s liability of tax specified bylaw.
(3) The person who obtains ownership shall,
subject to Sub-section (3), bear the obligation of safely
maintaining the accounts, records and books of account f
the transaction of such an industry or business until the
prescribed period (before and after transfer) pursuant to
this Act.”
(4) The following Explanation shall be inserted in Clause (c) of Sub-
section (2) of Section 6:
“Explanation: For the purposes of this Clause, acquisition shall
be deemed in the following circumstance:
(a) Copyrights, patents, licenses, trademarks and
similar other rights,
(b) Advertisement services,
(c) Technical services, engineering services, services of
suppliers providing technical services, legal
services, accounting services, data and data
processing services, information services and similar
other services.
(d) In supplying the services as referred to in Sub-
section (1) or accepting any liability or undertaking
or in exercising that undertaking fully or partly or
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doing any business activities in exercise of such
right, or
(e) Insurance or reinsurance services other than the
facility of safe deposit.
(5) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of 13 percent.”
(6) The following Section 8A. shall be inserted after Section 8:
“8A. Provision of bank guarantee: (1) An industry that
exports more than Eighty percent of the total sale of the
last Twelve months after the operation of the industry may
make import by furnishing a bank guarantee in
consideration for tax while importing the raw materials
required to produce the goods in the quantity of export,
bank guarantee in consideration for tax leviable on such
goods.
Provided that, in order to avail such a facility, the
exporter has to make finished goods from the raw
materials, with Twenty percent value addition.
(2) The bank guarantee furnished pursuant to Sub-
section (1) and process of its release shall be as prescribed
by the Department.
(3) A person who enjoys the facility as referred to
in this Section shall not be entitled to the facility as
referred to in Sub-section (4) of Section 24.”
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(7) The following Section 9 shall be substituted for Section 9:
“9. Exemption for small vendor: Notwithstanding anything
contained in the other provisions of this Act, an exemption
may be provided to a small vendor, having a prescribed
annual taxable transaction threshold, from the
requirements of registration and filing of tax returns and
from such requirements as may be prescribed.
Provided that, if a small vendor wishes to have
his/her transaction registered voluntarily, he or she may
have such registration after completing the procedur s as
referred to in Section 10.”
This provision shall not be applicable in a case of
organizing exhibition, fair or other such transactions. In
the case of such registration the Tax Officer may cll
security a guarantee.
(8) Of Section 10,-
(a) The following Sub-sections (1) and (2) shall be
substituted for Sub-sections (1) and (2):
“(1) A person who intends to be engaged in any
transactions has to make an application, in the prescribed
format, to the Tax Officer, for registration, prior to
commencing the transactions.
(2) If any goods transacted by a person is taxable or
if any person operates of hardware, sanitary, furnit e,
fixture, furnishing, automobiles, electronics and marble
within a Municipal Corporation, Sub-municipal
Corporation, Municipality or Depart or within an are
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specified by the Department, the person has to make an
application in the prescribed format, to the Tax Officer, for
registration, within Thirty days after the date of imposition
of such tax or the date of commencement of the
transactions.”
(b) The word “application” shall be substituted forthe word
“petition” contained in Sub-section (4).
(9) Section 10A. shall be deleted.
(10) Of Section 11,-
(a) Of Sub-section (1),-
(1) The following Clause (c) shall be substituted for
Clause (c):
“(c) In the case of a partnership firm, if such
partnership firm is dissolved or the partner
dies,”
(2) The following Clause (d1) shall be inserted after
Clause (d):
“(d1) If the taxpayer is one who gives zero return
or does not give return at all within a
consecutive period of One year,”
(b) The following Sub-section (3) shall be substituted for
Sub-section (3):
“(3) Out of the goods that have already enjoyed
the tax deduction facility, the stock (capital goods as well)
remain available for use at the time of the cancellation of
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registration shall be deemed supplied at the market price
and tax shall be assessed and recovered accordingly.
Explanation: “capital goods” means any property or any
part of property and property that is used in taxable
transactions.”
(c) The following Sub-section (4) shall be substituted for
Sub-section (3):
“(4) If any act and liability as required to be
performed and borne pursuant to this Act shall be du by
the reason of commission or omission of any act at he
time of carrying on taxable transaction, the cancellation of
registration of such a taxpayer shall not in self rsult in the
exemption from the consequence of such a liability.”
(11) The following Section 12A. Shall be inserted after Section 12:
“12A. Taxable value of timber transaction: (1) There shall be
levied and collected tax on the amount of royalty of the
timber of national forest or the amount of auction,
whichever is higher, at the time of auction, release or saw
order, whichever is earlier.
(2) If the timber of a personal cultivated, private
forest or community forest for business purpose and
despite that royalty is not chargeable, tax shall be eviable
as if it were the timber of national forest.”
(12) Of Section 14,-
(a) The following proviso shall be inserted in Sub-section (1):
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“Provided that, a person who carries on annual
transaction of more than One Million Rupees shall issue
invoices with serial number and permanent accounts
number as well as his or her name, and address despite
that he or she is not registered.”
(b) The following Sub-sections (4), (5), (6) and (7) shall be
inserted after Sub-section (3):
“(4) One who transports goods attracting tax of
more than Ten Thousand Rupees outside the area
specified by the Department shall hold tax invoices with
him or her.
(5) The Department may order taxpayers to issue
invoices by using a cash machine or computer. Procedures
of such order shall be as prescribed by the Directo
General.
(6) The Department may, by publishing a notice or
giving an order in writing, so specify that any person
specified by such a notice or order has to make public the
retail sale value or price of any such goods as specified in
that order or notice for such period as specified therein.
No sale or transfer of any goods shall be made without
making public the retail sale price after the receipt of such
a notice or order.
(7) Provision shall be made that any person
specified pursuant to Sub-section (6) shall, in selling such
goods to any unregistered persons, have to issue invoices
of the price made public in the specified format and
collect also the tax at the consumer level.
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Provided that, any person not so specified pursuant
to Sub-section (6) may issue invoices as referred to in his
Sub-section in a prescribed format.”
(13) The following Sub-section (3) shall be inserted after Sub-section
(2) of Section 15:
“(3) Notwithstanding anything contained in Sub-sections
(1) and (2), a Local Body or Government of Nepal shall ave to
collect or recover tax at the time of sale of taxable goods or
services.
(14) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 16:
“(1a) The Department may have continuous access to the
computer database of taxpayers.”
(15) The following Section 16B. shall be inserted after Section 16A:
“16B. Deduction of tax paid on goods in the event of loss: In
the event of loss and damage due to arson, theft, accident,
wear and tear, or expired the date of uses goods of value
added tax paid on the goods shall be deducted as
prescribed.”
If there is lost by disruptive activity, to applicant for
reduce tax within One year.
(16) Of Section 17,-
(a) The words "high price" shall be deleted contained in
Clause (d) of Sub-section (2) of Section 17:
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(b) The following explanation shall be inserted after Sub-
section (2):
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Explanation:
(a) "Personal use" means to be used by ownself or
his/her relative.
(b) "Relative" means husband, wife, son, daughter
(including adopted son adopted daughter) father,
mother, grandfather, grandmother, elder brother,
younger brother, wife of elder brother, wife of
younger brother, elder sister, younger sister,
mother-in-law, father-in-law, brother-in-laws,
sister-in-laws, elder sister of wife, uncle, aunt,
nephew, niece, grandson and granddaughter of
natural person.
(c) The following Sub-section (5a) shall be substituted for
Sub-section (5a):
“(5a) The concerned taxpayer shall be allowed to
deduct tax paid on the capital goods that were imported or
purchased by entering into a loan agreement under
financial lease subject to Sub-section (2).”
(d) The following Sub-section (5b) shall be inserted after
Sub-section (5a):
“(5b) The concerned taxpayer shall be allowed to
deduct tax paid pursuant to Section 12A. and Sub-section
(3) of Section 15.”
(e) The following Sub-section (8) and (9) shall be inserted
after Sub-section (7):
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“(8) Notwithstanding anything contained elsewhere
in this Section, the name of a taxpayer who does not
submit the tax returns for Six months consecutively shall
be made public, and if there is any amount due for tax
deduction by such a taxpayer, such amount may be
suspended and his or her registration shall also be ipso
facto suspended.”
(9) Office shall give information of those taxpayers
whose registration is suspended pursuant to Sub-section
(8) and after getting such information, a customer who
purchases goods or service from such taxpayer, he/she
shall not be eligible to refund or rebate the tax.
(17) Of Section 18,-
(a) The words “or by registered post” shall be inserted after
the words “before the Tax Officer” contained in Sub-
section (1).
(b) The following Sub-sections (1a) shall be inserted after
Sub-section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), a taxpayer in a district where there is no
Inland Revenue Office may furnish the amount of tax
returns to be paid and submitted by him/her with the
Office of Funds and Accounts Controller of the same
district within the Fifteenth day of the month in which
he/she has to furnish the tax returns paying the tax. The
Office of Funds and Accounts Controller shall forwad the
returns of tax and payment of tax so received to the Inland
Revenue Office within Seven days.”
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(18) Of Section 19,-
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a taxpayer does not pay the tax within the
time limit specified in Sub-section (1), an extra charge of
Ten percent per annum shall be imposed on the amount of
tax due and outstanding.”
(b) Sub-section (3) is hereby deleted.
(c) The word and number “or (3)” shall be deleted contained
in Sub-section (4).
(d) The word and number “or (3)” shall be deleted contained
in Sub-section (5).
(19) Of Section 20,-
(a) The following Clauses (f) shall be inserted after Clause (e)
of Sub-section (1):
“(f) If supply is made to the group company,
(b) The following Sub-section (2A) shall be inserted after
Sub-section (2):
“(2A) Any manager or director, with an intention to
totally or partially evade tax commits an act and such an
act if the liability to pay tax, penalty or fine toany bodies
such a manager or director who acts with such intention
shall be personally responsible for such liability.
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If such a manager or director intentionally evades
tax with the help of wrong information, wrong document,
wrong data (facts and figure) or any other similar wrongful
acts, he/she shall be liable to bear the responsibility of
such amount and the charge and fine so imposed by the
law.
Provided that, the manager or director of a body,
who has performed his/her duty or responsibility with a
bona fide intention and the tax has been evaded in such
situation, the body shall be responsible for the tax so
evaded. ”
(c) The following Sub-section (4) shall be substituted for
Sub-section (4):
“(4) In assessing the tax pursuant to Sub-section
(1), tax assessment shall have to be made within Four
years from the date of submission of the tax returns. If the
tax assessment cannot be made within that period, the
returns so filed shall ipso facto be considered to be valid.”
(c) The following Sub-section (4a) shall be inserted after Sub-
section (4):
“(4a) Notwithstanding anything contained in Sub-
section (4), where any person has evaded tax by preparing
false accounts or invoices or other documents or by f aud,
the Department may at any time issue an order for the
reassessment of tax.”
(20) Of Section 21,-
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(a) The following Clause (c) shall be substituted for Clause
(c) of Sub-section (1):
“(c) By selling all or some of the properties of the
taxpayer through sealed quotations or auction at
the same time or various times.”
(b) Sub-section (2) shall be deleted.
(21) The following Section 22A. shall be inserted after Section 22:
“22A. Provision against tax evasion plan: Notwithstanding
anything contained elsewhere in this Act, if any taxpayer
commits any of the following acts with intention to take
advantage of tax, the taxpayer shall be deemed to have
committed enticement to evade tax through tax exemption
scheme, and the Director General may order the Tax
Officer to assess the tax of such a taxpayer and recover the
same:
(a) To lessen the liability of tax by making or doing
any scheme or act with mala fide intention to evade
tax by manipulating any provision contained in this
Act,
(b) If any person or entity does any act with mala fide
intention to lessen the liability of tax or enters into
agreement with that intention.
Explanation: For the purpose of this Section:
(a) "Plan" means any agreement, system,
advantage and any act directly or indirectly
related to the implementation of plan.
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(b) "Advantage of tax" means any of the
following act of a person committed for the
purpose of reducing the tax liability or
increasing the tax...... or tax reduction or
evading the responsibility of paying tax:
(1) If a person who is not registered for
the purpose of tax is involved in an
act as if he/she is registered or in an
act to receive (get) advantage of tax,
(2) If a person who is not registered for
the purpose of tax supplies goods and
services which are taxable or non-
taxable and such supply system
affects the person who is registered
for the purpose of tax,
(3) If supplies any goods or services
affecting the market price.
(22) The following Sections 23C. and 23D. shall be inserted after
Section 23B.:
“23C. Purchase of goods of under invoicing: (1) If any person
sells any goods by under invoicing, showing the selling
price lesser than the prevailing market price, the Tax
Officer shall, notwithstanding anything contained in the
laws in force, withhold the goods in stock similar to those
goods so under invoiced and sold and the Inland Revenue
Office may purchase or cause to be purchased the sam at
the price under invoiced and sold.
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(2) If, in purchasing or caused to be purchased the
goods by the Department or Office pursuant to Sub-
section (1), such a person does not agree to sell the goods,
the Department of office shall take such goods in its
custody, make calculation on the basis of the price at
which they were under invoiced and sold and make
payment when such a person shows up to receive
payment.
(3) The goods purchased or caused to be purchased
pursuant to Sub-sections (1) and (2) may be sold or
caused to be sold at such price and in accordance with
such procedures as may be specified by the Director
General.”
“23D. Power to make search, seizure or demand deposit or
security: (1) If the Tax Officer finds that any person, firm,
company or organization has done transaction by evading
tax and there is a possibility that the accused may go away
or the evidence and proof of offence may disappear, the
Tax Office may, with the approval of the Director General,
do or cause to be done any of the following acts:
(c) To seal the place of transaction,
(d) To demand cash deposit or wealth guarantee
in a sum equivalent to the tax evaded from
the person believed to have committed the
offence, by executing a memorandum to that
effect,
(2) The Tax Officer shall have the same powers as the
police may exercise under the laws in force in relation to the
investigation of offences pursuant to this Act.”
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(23) Of Section 25,-
(a) The following Clause (a) shall be substituted for Clause
(a) of Sub-section (1):
“(a) If a foreign county grants on reciprocity that t x
exemption facility to Nepalese diplomats whom the
Government of Nepal, Ministry of Foreign Affairs,
has granted diplomatic recognition or to persons
enjoying diplomatic facility and serving in regional
or international missions or institutions, the amount
of tax paid by the Nepal based diplomats of such
country or regional or international missions or
institutions to the extent of consumption by them.”
(b) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), the tax paid by a diplomatic body or diplomat
on the purchase of taxable goods or services shall not be
refunded if the amount purchase is less than One
Thousand Five Hundred Rupees at one time.”
(24) The following Sections 25A. shall be inserted after Section 25:
“25A. Refund of tax paid by foreign tourist on purchase: If a
foreign tourist visiting Nepal and returning by air
purchases taxable goods of more than Fifteen Thousand
Rupees and takes them with him or her, the tax paidon
such goods shall be refunded in accordance with the
procedures specified by the Department.
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(25) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of
interest shall be Fifteen per cent per annum.”
(26) Of Section 29,-
(a) Of Sub-section (1),-
(1) The following Clause (b1) shall be inserted after
Clause (b):
“(b1) In the event of failure to place a tax board in
accordance with this Act or the Rules
framed under this Act, a fine of Two
Thousand for each week and in the event of
failure to place it at the designate place, a
fine of One Thousand.”
(2) The following Clause (c) shall be substituted for
Clause (c):
“(c) In the event of violation of Sub-sections (1)
and (4) of Section 14, Five Thousand
Rupees for each instance fine including
recover the liable tax.”
(b) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) In the event of lessening tax liability without
observing this Act or the Rules framed under this
Act, the Tax Officer may fine up to Twenty Five
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percent of the amount of tax, on the grounds as
specified by the Department.”
(c) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a person commits any of the following offences,
the Tax Officer may impose a fine of cent percent of
the amount of tax or an imprisonment up to Six
months or both the fine and the imprisonment on
such a person:
(a) Preparing false accounts, invoices or other
documents;
(b) Committing an evasion of tax by fraud;
(c) If an unregistered person acts as if he or she
were a registered person;
(d) Carrying out a transaction by infringing Section
30.”
(e) Infringing Section 23C.;
(27) The following Section 29A. shall be inserted after Section 29:
“29A. Power of Department to order to furnish the amount
of fine: (1) Notwithstanding anything contained elsewhere
in this chapter, if any person, prior to the commencement
of proceedings of action, admits in writing that he or she
has committed another offence or more than such offence
set forth in Sub-section (2) of Section 29, the Department
my order such a person to furnish the amount of fine not
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exceeding the amount of fine imposable for the
commission of such an offence.
(2) In issuing order as referred to in Sub-section
(1), such an order has to set out the details of such
offence, amount of fine to be paid and date for payment of
the amount of fine.
(3) An order issued by the Department pursuant to
this Section shall be final.”
(28) The following Section 30A. shall be inserted after Section 30:
“30A. Power to order for reassessment of tax: (1) In cases
where, before tax is assessed, it appears from the
information given to the Director General that any action
relating to the assessment of tax is about to be irregular or
has been irregular, the Director General may, by executing
a memorandum clearly setting out the reasons, give
direction to the concerned Tax Officer to make
reassessment of tax or order any other Tax Officer to do
that act.
(2) In cases where it appears that tax liability has
increased because of tax assessment made by the Tax
Officer recklessly or with mala fide intention, the Director
General may give order to amend such tax assessment
order within Four months after the date of initial t x
assessment.”
(29) The following Section 31A. shall be substituted for Section 31A:
“31A. Application may be made for administrative review:
(1) A person who is not satisfied with any decision of tax
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assessment made by the Tax Officer may make an
application to the Department against the decision within
Thirty days of the date of receipt of a notice of that
decision.
(2)I n cases where the time limit for making
application pursuant to Sub-section (1) expires andy
person makes an application for the extension of time l mit
within Seven days from the date of expiration of the ime
limit, the Department may extend the time limit for a
period not exceeding Thirty days from the date of
expiration of the time limit.
(3) If the claim of the applicant appears to be true
upon examining the evidence and documents including the
application made by the taxpayer pursuant to Sub-section
(1), the Director General may, by executing a
memorandum setting out the clear reasons, void that tax
assessment order and direct the concerned Tax Officer to
make re-assessment of tax or order any Tax Officer to do
that act.
(4) The Department shall make decision on the
application within Sixty days after the date of making of
application pursuant to Sub-section (1).
(5) If the Department does not give decision within
the time limit as referred to in Sub-section (4), the
concerned person may make an appeal to the Revenue
Tribunal pursuant to Section 32.
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(6) The taxpayer who makes an application has to
furnish a cash deposit of One Third of the amount of tax in
controversy.
(7) In cases where excess of the amount to be
furnished pursuant to Sub-section (1) has been furnished
prior to the making of application, only the remaining
amount upon deduction of the amount covered by that
amount may be furnished as deposit.

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(30) The following Section 32 shall be substituted for Section 32:
“32. Appeal in the Revenue Tribunal: (1) A person who is
not satisfied with an order of suspension made by the
Director General pursuant to Section 30 or a decision
made by the Department pursuant to Sub-section (4) of
Section 31A. may file an appeal in the Revenue Tribunal
according to the Revenue Tribunal Act, 2031.
(2) The person who files an appeal pursuant to
Sub-section (1) has to register a copy of the appeal with
the Department within Fifteen days of the date of filing
appeal.”
(31) The following Section 32A. shall be inserted after Section 32:
“32A. Advance ruling: (1) If any person makes an application in
writing to the Department for the removal of any
confusion as to the application of this Act, the Department
may issue its version by an advance ruling as prescribed,
by notifying the person in writing.
(2) Notwithstanding anything contained in Sub-
section (1), the Department shall not be entitled to issue
an advance ruling referred to in Sub-section (1) on any
matter of confusion occurred in the implementation of this
Act in cases where such matter is sub judice in the court
or has already been decided by the court.
(32) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of
Nepal may obtain the service of the concerned expert for
the act related to tax auditing; and the provision
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governmental secrecy mentioned in Section 37 shall also
apply to such an expert.”
(33) The following Sub-section (1) shall be substituted for Sub-
section 91) of Section 40:
“(1) Award : A person who provides information, along with
evidence, showing that a taxpayer has evaded or attemp ed
to evade all or some portions of his/her tax liabilty may
be awarded, by a decision of the Director General, as
reward the amount that is equal to Twenty per cent of the
amount of tax recovered on the basis of that information.”
(34) The following Section (40A) shall be inserted after Section 40.
“40A. Fine and charge shall not be levied: Notwithstanding
anything contained elsewhere in this Act, if the burden of
tax so matters but the as such amount of tax collection
does not matters by virtue of the interpretation or decision
of this Act or Rules hereunder, no fine or charge shall be
collected before such interpretation or decision.”
(35) The following Schedule-1 and Schedule-2 shall be substituted
for Schedule-1 and Schedule-2:
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“ Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice, wheat, maize, barley, millet, buckwheat, pulses,
flour, rye flour, grains, paddy flakes, peas, chickpeas, kidney
peas, beans and similar basic unprocessed food materials and
their extracts.
(b) Green and fresh vegetable, fresh fruits, fresh eggs, tuberous roots,
and fruits, vegetables and as use in vegetable and tuberous roots,
fresh and unprocessed agro-products. (Except those t be
supplied hotels, restaurants, bars, guest houses, cafeteria and
other similar organizations).
(c) Unprocessed cash crops/cereals (such as sugarcane, cotton,
cardamom, ginger and saffron, flax, unprocessed tobacco, tea leaf
sold by farmers, proved orthodox tea producing using biological
fertilizer, packing of tea (tea chest), coffee, soybean, ground-
nuts, turmeric and oil-cake.
(d) Herbs (including their extracts).
Group 2. Goods of Basic Needs:
(a) Piped water, including water supplied by tankers.
(b) Wood and coal.
(c) Salt.
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Group 3. Live Animals and animal products
(a) Goats, sheep and mountain goats, yak and buffalos, bore and
pigs, rabbit and their unprocessed raw edible food items.
(b) Cows and she buffalos, she goats, and their fresh milk, (including
pasteurized), Fresh curd, bees and bee hives.
(c) Ducks, hens, cocks, turkey and similar other birds their fresh
meat and unprocessed raw items and eggs.
(d) Fresh or dried fish (except other than packed).
4. Agricultural inputs
(a) Crops, grasses, flowers or live trees and other plants, bulbs,
tubers, tuberous roots and bulbs and roots used as seeds.
(b) Manure, fertilizer and soil conditioners.
(c) Hand tools, spades, shovels, mattocks, picks, hoes, forks and
rakes, axes, bill hooks and similar hewing tools, secateurs of any
kind, scythes, sickles, hay knives, other than hand saws, hedge
shears, timber wedges, ploughshare and other tools of a kind used
in agriculture.
(d) Insecticides, fully or partially used only for crops.
(e) Use in agriculture function Tractors, cultivators, tantalum,
levelers to be used harvesting or threshing machine, thr shers,
fishing nets, to Eight horse power up to pumping sets.
(f) Feed and ingredient of feed supplements and bone dust.
Group 5. Medicine, Medical and Similar Health services
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(a) Health services.
(b) Human blood and human blood items and vaccines.
(c) Human or animal organs or tissue for medical research.
(d) Medicaments for treatment of livestock and human beings and
family planning means.
(e) Pacemakers used in treatment of heart diseases, stint, valve of
heart, goods made for, and suitable only for the us of, infirm
and disabled persons.
(f) X-ray film and oxygen gas to be used for treatment, bandage and
(g) Raw materials for drug industries: metal salts, oxides and
hydro-oxides used by drug industries and in the production of
IOL, falling under Chapter 28 of the Customs Tariff, as well as
raw materials of drugs (active ingredients of drugs) and raw
materials used by drug industries in production of drugs and
packing materials.
Group 6: Education
(a) Research related acts in schools or universities.
(b) Getting purpose for non-profit, Vocational or professional
trainings or refresher trainings.
(c) Educational services provided by schools and universities.
Group 7: Books, newspapers and printed materials
(a) Books, calendars, newsletters and printing and publication
thereof.
(b) Newsprint.
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Group 8: Artistic and cultural goods and services, carving services
(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programs.
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
Group 9: Passengers and goods transportation services
Air transport.
Group 10: Personal or Professional service:
Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually, and
services of supplying human resources to foreign countries.
Group 11: Other goods or services:
1. Postal services (only those provided by the Governm nt of
Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets.
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packets.
(c) Postage stamps.
(d) Services provided by the Government of Nepal.
2. Excise duty stamp, cash machine and passport.
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3. Financial services and life insurance services.
4. Bank notes and cheque books:
(a) Printing and issue of bank notes.
(b) Supply of bank notes from foreign countries into Nepal.
(c) Cheque books.
5. Gold and silver:
(a) Gold coins, gold ornaments and diamond ornaments.
(b) Silver and silver coins, silver ready-made goods and
ornaments.
6. (a) Electricity supply of 440, 220 volt,
(b) Hydro power project upto Three megawatt.
7. Raw wool.
8. Battery operated tempo and their chassis and Battery.
9. Bio-gas, solar power and wind power operated machine and
equipments.
10. Aircrafts and helicopters, fire engine (Damcal), ambulances and
corpse carrying vehicles.
11. Jute products.
12. Industrial machines up to 5 percent customs duty as falling under
Part 84 of the Customs Tariff.
13. Woolen carpet and woolen carpet weaving, dying, washing and
knitting.
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14. 100 percent cotton sari, Lungi, Dhoti (for both men and
women), Gamcha and cotton yarn.
15. Woolen yarn to be used in hand knitting sweater (except artificial
and acrylic) domestically.
16. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
17. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
18. If the Government of Nepal considers reasonable to grant any
exemption to any taxable goods or to refund tax, it may grant
such exemption by publishing a notice in the Nepal G zette.
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the
services provided by such entities carrying on business such as
hotels and guest houses).
Group 13: Betting, casinos and lotteries
Activities relating to facilities provided for the organization of
bets or gambling, and lottery.
Note:
(1) The Department, as prescribed, and in consultation with the
Department of Customs, interpretation of the goods and services
enjoying tax emption and the Harmonized Code of Comm dities
as necessary.
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(2) Tax paid for the purpose of value added tax, among them Seventy
Five percent for Textile industries and Twenty Five p rcent for
flour or rubber industries shall be refunded after ulfilling the
procedures specified by the Department.
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Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
2. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
3. Goods or services imported by a person or mission enjoying diplomatic
facility and a person serving in a diplomatic mission enjoying tariff
facility, on the recommendation of the Ministry of Foreign Affairs,
Government of Nepal.
4. If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
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shall be provided on such supplies, so long as suchtreaty or agreement
is in effect.
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Financial Act, 2064 (2007)
Date of Authentication and Publication 2064.3.28 (12 July, 2007)

An Act Made to Implement Proposals Relating to Finance of the
Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal;
Now, therefore, be it enacted by Legislature-Parliament.
1. Short title and commencement: (1) This Act may be called as the
“Financial Act, 2064 (2007)."
(2) Sections 1, 2, 3, 4, 5, 9 and 11 of this Act shall be deemed to
have come into force on 28 Ashad 2064 (11 July2007) and the other
Sections on 1 Shrawan 2064(17 July 2007).
35. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) Of Section 2,-
(a) The following Clause (f1) shall be inserted after Clause
(f):
“(f1) “Group of companies or entities” means a group of
companies or entities in relation to which the
following situation exists:
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(a) If any business is carried on by a person or
agent member associated with the group of
entities,
(b) If any goods or services are supplied by the
group of entities to any entity or group of
other entities associated with it,
(c) If any goods or services are supplied to the
group of entity or member of the group,
(d) If the permanent address of operation of
business of any two or more than two
entitles is in the same place, or
(e) If the group of entities is controlled directly
or indirectly by any one person or some
persons.”
(b) The following Clause (h) shall be substituted for Clause
(h):
“(h) "Consideration" means anything to be obtained in
exchange for the price of any goods or services
being supplied.”
(c) The following Clause (h1) shall be inserted after Clause
(h):
“(h1) "Loan agreement" means a hire purchase agreement
or financial lease.”
(d) The following Clause (k1) shall be substituted for Clause
(k):
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“(k1) Electronic medium" includes approved means such
as the computer, fax, e-mail, internet, electronic
cash register/machine and fiscal printer.
(e) The following Clause (t) shall be substituted for Clause
(t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax
Officer and the Chief Tax Administrator appointed
by the Government of Nepal for the purpose of this
Act, and this term includes a section office, director
and deputy director at the Department or such
other officer designated by the Government of
Nepal authorizing to exercise the powers of Tax
Officer under this Act.”
(2) The following Section 4 shall be substituted for Section 4:
“4. Jurisdiction of the Tax Officer: (1) The jurisdiction of
Tax Officer shall be as prescribed by the Government of
Nepal.
(2) The Director General of Department may also
so designate a Tax Office as to inspect and monitor also
the transaction of taxpayers in other areas than those
falling under his or her jurisdiction.”
(3) The following Section 5A. shall be substituted for Section 5A:
“5A. Tax not to be levied on transfer of ownership of
transactions: Notwithstanding anything contained
elsewhere in this Act, in cases where a registered person
sells the transaction being carried out by him or her to any
other registered person or the transaction is transferred in
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the name of his or her heir by virtue of death, such transfer
of ownership shall not be subject to tax. The person
registered in so selling or transferring the transaction shall
give information thereof to the Department as prescribed.
(2) Notwithstanding anything contained in Sub-
section (1), if any industry or business that is required to
be registered or has been registered pursuant to laws is
transferred, the transferee who obtains the ownership shall
bear the transferor’s liability of tax specified bylaw.
(3) The person who obtains ownership shall,
subject to Sub-section (3), bear the obligation of safely
maintaining the accounts, records and books of account f
the transaction of such an industry or business until the
prescribed period (before and after transfer) pursuant to
this Act.”
(4) The following Explanation shall be inserted in Clause (c) of Sub-
section (2) of Section 6:
“Explanation: For the purposes of this Clause, acquisition shall
be deemed in the following circumstance:
(a) Copyrights, patents, licenses, trademarks and
similar other rights,
(b) Advertisement services,
(c) Technical services, engineering services, services of
suppliers providing technical services, legal
services, accounting services, data and data
processing services, information services and similar
other services.
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(d) In supplying the services as referred to in Sub-
section (1) or accepting any liability or undertaking
or in exercising that undertaking fully or partly or
doing any business activities in exercise of such
right, or
(e) Insurance or reinsurance services other than the
facility of safe deposit.
(5) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of 13 percent.”
(6) The following Section 8A. shall be inserted after Section 8:
“8A. Provision of bank guarantee: (1) An industry that
exports more than Sixty percent of the total sale of the last
Twelve months after the operation of the industry may
make import by furnishing a bank guarantee with the
concerned Tax Office in consideration for tax while
importing the raw materials required to produce the goods
in the quantity of export, and import of goods to be
imported for a duty free shop through a bonded warehouse
may be made by furnishing a bank guarantee with the
concerned Tax Office in consideration for tax leviable on
such goods.
Provided that, except for the import by a duty free
shop through a bonded warehouse, in order for the or
exporter to avail such a facility, the exporter has to make
finished goods from the raw materials, with Twenty
percent value addition.
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(2) The bank guarantee furnished pursuant to Sub-
section (1) shall be released from the concerned Tax
Office in accordance with the procedures specified by the
Department.
(3) A person who enjoys the facility as referred to
in this Section shall not be entitled to the facility as
referred to in Sub-section (4) of Section 24.”
(7) The following Section 9 shall be substituted for Section 9:
“9. Exemption for small vendor: Notwithstanding anything
contained in the other provisions of this Act, an exemption
may be provided to a small vendor, having a prescribed
annual taxable transaction threshold, from the
requirements of registration and filing of tax returns and
from such requirements as may be prescribed.
Provided that, if a small vendor wishes to have his
or her transaction registered voluntarily, he or she may
have such registration after completing the procedur s as
referred to in Section 10.”
(8) Of Section 10,-
(a) The following Sub-sections (1) and (2) shall be
substituted for Sub-sections (1) and (2):
“(1) A person who intends to be engaged in any
transactions has to make an application, in the prescribed
format, to the Tax Officer, for registration, prior to
commencing the transactions.
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(2) If any goods transacted by a person is taxable or
if any person operates of hardware, sanitary, furnit e,
fixture, furnishing, automobiles, electronics and marble
within a Municipal Corporation, Sub-municipal
Corporation, Municipality or Depart or within an are
specified by the Department, the person has to make an
application in the prescribed format, to the Tax Officer, for
registration, within Thirty days after the date of imposition
of such tax or the date of commencement of the
transactions.”
(b) The word “application” shall be substituted forthe word
“petition” contained in Sub-section (4).
(9) Section 10A. shall be repealed.
(10) The following Section 10B. shall be inserted after Section 10A:
“10B. Special provision relating to provisional registration:
(1) In the case of an exhibition, fair and similar other
transaction to be organized temporarily, the organizer and
any entrepreneur who carries on the transaction of any
taxable goods or services in such an exhibition or fair and
is not registered with the Value Added Tax shall have to
be registered with the Value Added Tax. In the case of a
person who is so registered, the Tax Officer may requir a
deposit in consideration for security.
(2) An entrepreneur who has been registered with
the Value Added Tax since previously pursuant to Sub-
section (1) may take back through stock transfer th goods
exhibited in that program.
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(3) A tax payer who has been registered only for
the program as referred to in Sub-section (1) shall have to
cancel the temporary registration by furnishing the details
of transaction and paying all the leviable tax within Seven
days after the completion of the organized exhibition or
fair.”
(11) Of Section 11,-
(a) Of Sub-section (1),-
(1) The following Clause (c) shall be substituted for
Clause (c):
“(c) In the case of a partnership firm, if such
partnership firm is dissolved or the partner
dies,”
(2) The following Clause (d1) shall be inserted after
Clause (d):
“(d1) If the taxpayer is one who gives zero return
or does not give return at all within a
consecutive period of One year,”
(3) The following Sub-section (1b) shall be inserted
after Sub-section (1a) of Section 11:
“(1b) A taxpayer has to submit his or her
documents for auditing within fifteen days of
the submission of the tax returns for
cancellation of registration, and the Tax
Officer shall perform the audit of such a
taxpayer, cancel the registration within
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Three months or if registration is not to be so
cancelled, the Tax Officer shall give
information thereof to the taxpayer. If the
Tax Officer does not cancel registration or
make decision to cancel registration within
that period, the taxpayer is not obliged to
furnish the tax returns subsequent to that
period.”
(b) The following Sub-section (3) shall be
substituted for Sub-section (3):
“(3) Out of the goods that have
already enjoyed the tax deduction facility,
the stock (capital goods as well) remain
available for use at the time of the
cancellation of registration shall be deemed
supplied at the market price and tax shall be
assessed and recovered accordingly.
Explanation: For the purposes of this Sub-
section, “capital goods” shall mean any
property or any part of property and
property that is used in taxable
transactions.”
(c) The following Sub-section (4) shall be
substituted for Sub-section (3):
“(4) If any act and liability as
required to be performed and borne pursuant
to this Act shall be due by the reason of
commission or omission of any act at the
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time of carrying on taxable transaction, the
cancellation of registration of such a
taxpayer shall not in self result in the
exemption from the consequence of such a
liability.”
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(12) The following Section 12A. Shall be inserted after Section 12:
“12A. Taxable value of timber transaction: (1) There shall be
levied and collected tax on the amount of royalty of the
timber of national forest or the amount of auction,
whichever is higher, at the time of auction, release or saw
order, whichever is earlier.
(2) If the timber of a personal cultivated, private
forest or community forest for business purpose and
despite that royalty is not chargeable, tax shall be eviable
as if it were the timber of national forest.”
(13) Of Section 14,-
(a) The following proviso shall be inserted in Sub-section (1):
“Provided that, a person who carries on annual
transaction of more than One Million Rupees shall issue
invoices with serial number and permanent accounts
number as well as his or her name, and address despite
that he or she is not registered.”
(b) The following Sub-sections (4), (5), (6) and (7) shall be
inserted after Sub-section (3):
“(4) One who transports goods attracting tax of
more than Ten Thousand Rupees outside the area
specified by the Department shall hold tax invoices with
him or her.
(5) The Department may order taxpayers to issue
invoices by using a cash machine or computer. Procedures
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of such order shall be as prescribed by the Directo
General.
(6) The Department may, by publishing a notice or
giving an order in writing, so specify that any person
specified by such a notice or order has to make public the
retail sale value or price of any such goods as specified in
that order or notice for such period as specified therein.
No sale or transfer of any goods shall be made without
making public the retail sale price after the receipt of such
a notice or order.
(7) Provision shall be made that any person
specified pursuant to Sub-section (6) shall, in selling such
goods to any unregistered persons, have to issue invoices
of the price made public in the specified format and
collect also the tax at the consumer level.
Provided that, any persons not so specified
pursuant to Sub-section (6) may issue invoices as referred
to in this Sub-section as prescribed format.”
(14) The following Sub-section (3) shall be inserted after Sub-section
(2) of Section 15:
“(3) Notwithstanding anything contained in Sub-sections
(1) and (2), a Local Body or Government of Nepal shall ave to
collect or recover tax at the time of sale of taxable goods or
services.
(15) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 16:
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“(1a) The Department may have continuous access to the
computer database of taxpayers.”
(16) The following Sub-section (3a) shall be inserted after Sub-
section (3) of Section 16:
“(3a) A person who carries on the transactions of taxable
goods or services but is not registered has himself or herself
certify the account of purchase and sale for each financial year.
The Tax Officer may at any time examine such an account.”
(17) The following Section 16A. Shall be substituted for Section 16A:
“16A. Records processed by computer to be eligible as
evidence: (1) Notwithstanding contained in the laws in
force, the records relating to taxpayer processed by the
computer installed in the Department or offices thereunder
shall be eligible as evidence for purposes of tax, except as
otherwise proved.
(2) The Department may by publishing a notice,
make necessary arrangements on the issuance of invoices,
maintenance of accounts, submission of tax returns and
payment through electronic medium."
(18) The following Section 16B. shall be inserted after Section 16A:
“16B. Deduction of tax paid on goods in the event of loss: In
the event of loss and damage due to arson, theft, accident,
wear and tear, disruptive activity or expired the date of
uses goods of value added tax paid on the goods shall be
deducted as prescribed.”
(19) Of Section 17,-
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(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) Notwithstanding anything contained in Sub-
section (1), it may be provided that no deduction or only a
partial deduction may be granted in the case of the
prescribed goods that can be used for personal purpose or
for business purpose or for both purposes.”
(b) The following Sub-section (5a) shall be substituted for
Sub-section (5a):
“(5a) The concerned taxpayer shall be allowed to
deduct tax paid on the capital goods that were imported or
purchased by entering into a loan agreement under
financial lease subject to Sub-section (2).”
(c) The following Sub-section (5b) shall be inserted after
Sub-section (5a):
“(5b) The concerned taxpayer shall be allowed to
deduct tax paid pursuant to Section 12A. and Sub-section
(3) of Section 15.”
(d) The following Sub-section (8) shall be inserted after Sub-
section (7):
“(8) Notwithstanding anything contained
elsewhere in this Section, the name of a taxpayer who
does not submit the tax returns for Six months
consecutively shall be made public, and if there is any
amount due for tax deduction by such a taxpayer, such
amount may be suspended and his or her registration may
also be suspended.”
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(20) Of Section 18,-
(a) The words “or by registered post” shall be inserted after
the words “before the Tax Officer” contained in Sub-
section (1).
(b) The following Sub-sections (1a) shall be inserted after
Sub-section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), a taxpayer in a district where there is no
Inland Revenue Office may furnish the amount of tax
returns to be paid and submitted by him/her with the
Office of Funds and Accounts Controller of the same
district within the Fifteenth day of the month in which
he/she has to furnish the tax returns paying the tax. The
Office of Funds and Accounts Controller shall forwad the
returns of tax and payment of tax so received to the Inland
Revenue Office within Seven days.”
(21) Of Section 19,-
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a taxpayer does not pay the tax within the
time limit specified in Sub-section (1), an extra charge of
Ten percent per annum shall be imposed on the amount of
tax due and outstanding.”
(b) Sub-section (3) is hereby deleted.
(c) The word and number “or (3)” shall be deleted contained
in Sub-section (4).
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(d) The word and number “or (3)” shall be deleted contained
in Sub-section (5).
(22) Of Section 20,-
(a) The following Clauses (f) shall be inserted after Clause (e)
of Sub-section (1):
“(f) If supply is made to the group company by making
under invoicing,
(b) The following Sub-section (4) shall be substituted for
Sub-section (4):
“(4) In assessing the tax pursuant to Sub-section
(1), tax assessment shall have to be made within Four
years from the date of submission of the tax returns. If the
tax assessment cannot be made within that period, the
returns so filed shall ipso facto be considered to be valid.”
(c) The following Sub-section (4a) shall be inserted after Sub-
section (4):
“(4a) Notwithstanding anything contained in Sub-
section (4), where any person has evaded tax by preparing
false accounts or invoices or other documents or by f aud,
the Department may at any time issue an order for the
reassessment of tax.”
(23) Of Section 21,-
(a) The following Clause (c) shall be substituted for Clause
(c) of Sub-section (1):
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“(c) By selling all or some of the properties of
the taxpayer through sealed quotations or
auction at the same time or various times.”
(b) Sub-section (2) shall be deleted.
(24) The following Section 22A. shall be inserted after Section 22:
“22A. Provision against tax evasion plan: Notwithstanding
anything contained elsewhere in this Act, if any taxpayer
commits any of the following acts with mala fide inte tion
to take advantage of tax, the taxpayer shall be deemed to
have committed enticement to evade tax through tax
exemption scheme, and the Director General may order
the Tax Officer to assess the tax of such a taxpayer nd
recover the same:
(a) To lessen the liability of tax by making or doing
any scheme or act with mala fide intention to evade
tax by manipulating any provision contained in this
Act,
(b) If any person or entity does any act with mala fide
intention to lessen the liability of tax or enters into
agreement with that intention.”
(25) The following Sections 23C. and 23D. shall be inserted after
Section 23B.:
“23C. Purchase of goods of under invoicing: (1) If any person
sells any goods by under invoicing, showing the selling
price lesser than the prevailing market price, the Tax
Officer shall, notwithstanding anything contained in the
laws in force, withhold the goods in stock similar to those
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goods so under invoiced and sold and the Inland Revenue
Office may purchase or cause to be purchased the sam at
the price under invoiced and sold.
(2) If, in purchasing or caused to be purchased th
goods by the Department or Office pursuant to Sub-
section (1), such a person does not agree to sell the goods,
the Department of office shall take such goods in its
custody, make calculation on the basis of the price at
which they were under invoiced and sold and make
payment when such a person shows up to receive
payment.
(3) The goods purchased or caused to be purchased
pursuant to Sub-sections (1) and (2) may be sold or
caused to be sold at such price and in accordance with
such procedures as may be specified by the Director
General.”
“23D. Power to make search, seizure or demand deposit or
security: (1) If the Tax Officer finds that any person, firm,
company or organization has done transaction by evading
tax and there is a possibility that the accused may go away
or the evidence and proof of offence may disappear, the
Tax Office may, with the approval of the Director General,
do or cause to be done any of the following acts:
(a) To seal the place of transaction.
(b) To take custody of the electronic equipment
or records thereof.
(c) To demand cash deposit or wealth guarantee
in a sum equivalent to the tax evaded from
the person believed to have committed the
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offence, by executing a memorandum to that
effect.

(2) The Tax Officer shall have the same powers as
the police may exercise under the laws in force in relation
to the investigation of offences pursuant to this Act.”
(26) The following Sub-section (5) shall be substituted for Sub-
section (5) of Section 24:
“(5) On the submission of an application pursuant to Sub-
section (3) or (4), the Tax Officer shall refund immediately the
amount held to be refundable, and if such an amount is not
refunded within Thirty days after the date of submission of
application in relation to the matter referred to in Sub-section (3)
and within Sixty days in relation to the matter refe red to in Sub-
section (4), the Government of Nepal shall have to pr vide
interest on that amount, as prescribed.”
(27) Of Section 25,-
(a) The following Clause (a) shall be substituted for Clause
(a) of Sub-section (1):
“(a) If a foreign county grants on reciprocity that t x
exemption facility to Nepalese diplomats whom the
Government of Nepal, Ministry of Foreign Affairs,
has granted diplomatic recognition or to persons
enjoying diplomatic facility and serving in regional
or international missions or institutions, the amount
of tax paid by the Nepal based diplomats of such
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country or regional or international missions or
institutions to the extent of consumption by them.”
(b) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), the tax paid by a diplomatic body or diplomat
on the purchase of taxable goods or services shall not be
refunded if the amount purchase is less than One
Thousand Five Hundred Rupees at one time.”
(28) The following Sections 25A. shall be inserted after Section 25:
“25A. Refund of tax paid by foreign tourist on purchase: If a
foreign tourist visiting Nepal and returning by air
purchases taxable goods of more than Fifteen Thousand
Rupees and takes them with him or her, the tax paidon
such goods shall be refunded in accordance with the
procedures specified by the Department.
(29) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of interest
shall be Fifteen per cent per annum.”
(30) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 28:
“(1a) If any goods manufactured or prepared within
Nepal, after the completion of export procedures by the Customs
Office or after reaching a foreign country, are re-imported
because of rejection by the concerned customer or other reason,
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and the same goods are to be exported within Three months of
the import, the goods may be released against the deposit of the
value added tax leviable at the time of such return, a d the
deposit shall be refunded after the re-export of such goods. The
concerned Customs Office shall provide the details of amount so
furnished as a deposit and refunded to the Inland Revenue
Office.”
(31) Of Section 29,-
(a) Of Sub-section (1),-
(1) The following Clause (b1) shall be inserted after
Clause (b):
“(b1) In the event of failure to place a tax board in
accordance with this Act or the Rules
framed under this Act, a fine of Two
Thousand for each week and in the event of
failure to place it at the designate place, a
fine of One Thousand.”
(2) The following Clause (c) shall be substituted for
Clause (c):
“(c) In the event of violation of Sub-sections (1)
and (4) of Section 14, Five Thousand
Rupees for each instance fine including
recover the liable tax.”
(3) The following Clause (g1) shall be inserted after
Clause (g):
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“(g1) In the event of violation of Sub-section (3a)
of Section 16, One Thousand Rupees for
each instance.”

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(b) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) In the event of lessening tax liability without
observing this Act or the Rules framed under this
Act, the Tax Officer may fine up to Twenty Five
percent of the amount of tax, on the grounds as
specified by the Department.”
(c) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a person commits any of the following offences,
the Tax Officer may impose a fine of cent percent of
the amount of tax or an imprisonment up to Six
months or both the fine and the imprisonment on
such a person:
(a) Preparing false accounts, invoices or other
documents;
(b) Committing an evasion of tax by fraud;
(c) If an unregistered person acts as if he or she
were a registered person;
(d) Infringing Section 23C.;
(e) Carrying out a transaction by infringing
Section 30.”
(32) The following Section 29A. shall be inserted after Section 29:
“29A. Power of Department to order to furnish the amount
of fine: (1) Notwithstanding anything contained elsewhere
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in this chapter, if any person, prior to the commencement
of proceedings of action, admits in writing that he or she
has committed another offence or more than such offence
set forth in Sub-section (2) of Section 29, the Department
my order such a person to furnish the amount of fine not
exceeding the amount of fine imposable for the
commission of such an offence.
(2) In issuing order as referred to in Sub-section
(1), such an order has to set out the details of such
offence, amount of fine to be paid and date for payment of
the amount of fine.
(3) An order issued by the Department pursuant to
this Section shall be final.”
(33) The following Section 30A. shall be inserted after Section 30:
“30A. Power to order for reassessment of tax: (1) In cases
where, before tax is assessed, it appears from the
information given to the Director General that any action
relating to the assessment of tax is about to be irregular or
has been irregular, the Director General may, by executing
a memorandum clearly setting out the reasons, give
direction to the concerned Tax Officer to make
reassessment of tax or order any other Tax Officer to do
that act.
(2) In cases where it appears that tax liability has
increased because of tax assessment made by the Tax
Officer recklessly or with mala fide intention, the Director
General may give order to amend such tax assessment
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order within Four months after the date of initial t x
assessment.”
(34) The following Section 31A. shall be substituted for Section 31A:
“31A. Application may be made for administrative review:
(1) A person who is not satisfied with any decision of tax
assessment made by the Tax Officer may make an
application to the Department against the decision within
Thirty days of the date of receipt of a notice of that
decision.
(2) In cases where the time limit for making
application pursuant to Sub-section (1) expires andy
person makes an application for the extension of time l mit
within Seven days from the date of expiration of the ime
limit, the Department may extend the time limit for a
period not exceeding Thirty days from the date of
expiration of the time limit.
(3) If the claim of the applicant appears to be true
upon examining the evidence and documents including the
application made by the taxpayer pursuant to Sub-section
(1), the Director General may, by executing a
memorandum setting out the clear reasons, void that tax
assessment order and direct the concerned Tax Officer to
make re-assessment of tax or order any Tax Officer to do
that act.
(4) The Department shall make decision on the
application within Sixty days after the date of making of
application pursuant to Sub-section (1).
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(5) If the Department does not give decision within
the time limit as referred to in Sub-section (4), the
concerned person may make an appeal to the Revenue
Tribunal pursuant to Section 32.
(6) The taxpayer who makes an application
pursuant to Sub-section (1) has to pay undisputed amount
of tax, out of the amount of tax assessed, and furnish a
cash deposit of One Third of the amount of tax in
controversy.
(7) In cases where excess of the amount to be
furnished pursuant to Sub-section (1) has been furnished
prior to the making of application, only the remaining
amount upon deduction of the amount covered by that
amount may be furnished as deposit.
(35) The following Section 32 shall be substituted for Section 32:
“32. Appeal in the Revenue Tribunal: (1) A person who is
not satisfied with an order of suspension made by the
Director General pursuant to Section 30 or a decision
made by the Department pursuant to Sub-section (4) of
Section 31A. may file an appeal in the Revenue Tribunal
according to the Revenue Tribunal Act, 2031.
(2) The person who files an appeal pursuant to
Sub-section (1) has to register a copy of the appeal with
the Department within Fifteen days of the date of filing
appeal.”
(36) The following Section 32A. shall be inserted after Section 32:
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“32A. Advance ruling: (1) If any person makes an application in
writing to the Department for the removal of any
confusion as to the application of this Act, the Department
may issue its version by an advance ruling as prescribed,
by notifying the person in writing.
(2) Notwithstanding anything contained in Sub-
section (1), the Department shall not be entitled to issue
an advance ruling referred to in Sub-section (1) on any
matter of confusion occurred in the implementation of this
Act in cases where such matter is sub judice in the court
or has already been decided by the court.
(37) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of
Nepal may obtain the service of the concerned expert for
the act related to tax auditing; and the provision
governmental secrecy mentioned in Section 37 shall also
apply to such an expert.”
(38) The following Sub-section (1) shall be substituted for Sub-
section 91) of Section 40:
“(1) A person who provides information, along with
evidence, showing that a taxpayer has evaded or attemp ed to
evade all or some portions of his or her tax liabilty may be
awarded, by a decision of the Director General, as reward the
amount that is equal to Twenty per cent of the amount of tax
recovered on the basis of that information."
(39) The following Schedule-1 and Schedule-2 shall be substituted
for Schedule-1 and Schedule-2:
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“ Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice, wheat, maize, barley, millet, buckwheat, pulses,
flour, rye flour, grains, paddy flakes, peas, chickpeas, kidney
peas, beans and similar basic unprocessed food materials and
their extracts.
(b) Green and fresh vegetable, fresh fruits, fresh eggs, tuberous roots,
and fruits, vegetables and as use in vegetable and tuberous roots,
fresh and unprocessed agro-products. (Except those t be
supplied hotels, restaurants, bars, guest houses, cafeteria and
other similar organizations).
(c) Unprocessed cash crops/cereals (such as sugarcane, cotton,
cardamom, ginger and saffron, flax, unprocessed tobacco, tea leaf
sold by farmers, tea chest, proved orthodox tea producing using
biological fertilizer, coffee, soybean, ground-nuts, turmeric, oil-
cake and other solid residues.
(d) Herbs (including their extracts).
Group 2. Goods of Basic Needs:
(a) Piped water, including water supplied by tankers.
(b) Wood and coal.
(c) Salt.
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(d) Kerosene.
Group 3. Live Animals and animal products
(a) Goats, sheep and mountain goats , yak and buffalos , bore and
pigs , rabbit and their unprocessed raw edible food items.
(b) Cows and she buffalos, she goats, and their fresh milk, (including
pasteurized), curd, bees and bee hives and bee keeping
machinery, including germination plant, metal barrel, bee brush,
base roller, gear pump and wheel plate and bee harvesting or
threshing machinery.
(c) Ducks, hens, cocks, turkey and similar other birds their fresh
meat and unprocessed raw items and eggs.
(d) Fresh or dried fish (except other than packed).
4. Agricultural inputs
(a) Crops, grasses, flowers or live trees and other plants, bulbs,
tubers, tuberous roots and bulbs and roots used as seeds
(b) Manure, fertilizer and soil conditioners.
(c) Hand tools, spades, shovels, mattocks, picks, hoes, forks and
rakes, axes, bill hooks and similar hewing tools, secateurs of any
kind, scythes, sickles, hay knives, other than hand saws, hedge
shears, timber wedges, ploughshare and other tools of a kind used
in agriculture.
(d) Insecticides, rodenticides, fungicides, herbicides and de-ratting
drugs as mentioned in Chapter 38 of Customs Tariff used only for
crops.
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(e) Use in agriculture function Tractors, cultivators, tantalum,
levelers, harvesting or threshing machine, threshers, fishing nets,
ready-made cages for aquaculture, fish incubators, pumping sets
with engines from Two to Eight horse power and up to 30 meters
hose pipe accompanied with the sets, used in irrigation works.
(f) Raw materials of deed supplements falling under Chapter 23 of
the Customs Tariff, and lime stone dust, bone dust and fish dust.
(g) Special kind of utensils for feeding poultry feed except normal or
general utensils, and special kinds of utensils for feeding water to
poultry.
Group 5. Medicine, Medical and Similar Health services
(a) Health services.
(b) Human blood and human blood items and vaccines.
(c) Human or animal organs or tissue for medical research.
(d) Medicaments for treatment of livestock and human beings and
family planning means.
(e) Pacemakers used in treatment of heart diseases, stint, valve of
heart, goods made for, and suitable only for the us of, infirm
and disabled persons.
(f) X-ray film and oxygen gas to be used for treatment, bandage and
(g) Raw materials for drug industries: metal salts, oxides and
hydro-oxides used by drug industries and in the production of
IOL, falling under Chapter 28 of the Customs Tariff, as well as
raw materials of drugs (active ingredients of drugs) and raw
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materials used by drug industries in production of drugs and
packing materials.
Group 6: Education
(a) Research related acts in schools or universities
(b) Getting purpose for non-profit, Vocational or professional
trainings or refresher trainings
(c) Educational services provided by schools and universities.
Group 7: Books, newspapers and printed materials
(a) Books, calendars, newsletters (headings 49.01, 49.02, 49.04) and
printing and publication thereof,
(b) Newsprint (heading 48.01)
Group 8: Artistic and cultural goods and services, carving services
(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programs,
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
Group 9: Passengers and goods transportation services
Air transport, passenger transportation (except cabal car) and goods
carrier service (except transportation related to supply).
Group 10: Personal or Professional service:
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Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually, and
services of supplying human resources to foreign countries.
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Group 11: Other goods or services:
1. Postal services (only those provided by the Governm nt of
Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets.
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packets.
(c) Postage stamps.
(d) Services provided by the Government of Nepal.
2. Excise duty stamp, cash machine and passport.
3. Financial services and life insurance services.
4. Bank notes, coins and cheque books:
(a) Printing and issue of bank notes.
(b) Supply of bank notes from foreign countries into Nepal.
(c) Cheque books.
5. Gold and silver:
(a) Gold, gold coins, gold ornaments and diamond ornaments.
(b) Silver, and silver coins, silver ready-made goods and
ornaments.
6. Electricity supply.
7. Raw wool.
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8. Battery operated tempo and their chassis and Battery.
9. Bio-gas, solar power and wind power operated power generation
plants and their equipment and solar photovoltaic flat plate or
tubular battery, on the recommendation of the Alternative Energy
Promotion Centre.
10. Aircrafts and helicopters and their engines, ambulances and
corpse carrying vehicles.
11. Jute batching oil and jute products.
12. Mills, machineries and equipment, molding keys (except spare
parts) other than those that can be used in household attracting
up to 5 percent customs duty as falling under Part 84 of the
Customs Tariff.
13. Woolen carpet and woolen carpet weaving, dying, washing and
knitting.
14. 100 percent cotton sari, Lungi, Dhoti (for both men and
women), Gamcha and cotton yarn.
15. Woolen yarn to be used in hand knitting sweater (except artificial
and acrylic) domestically.
16. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
17. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
18. Amount equal to such tax as deemed payable that remains
balance upon deducting the tax paid on purchase from the tax
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collected on the sale of goods by textile, match (only wooden
stick) and tyre-tube industries shall be refunded to these
industries in accordance with the procedures specified by the
Department.
19. Only Fifty percent of the amount equal to such tax as deemed
payable that remains balance upon deducting the tax paid on
purchase from the tax collected on the sale of products
(sugarcane and flour) by sugarcane and flour industries shall be
refunded to these industries in accordance with the procedures
specified by the Department.
20. If any native industry that manufactures mobile hand set and
importer thereof submits evidence that they have sold the tax
paid on the raw materials of mobile hand set or readymade goods
to Fifty percent shall be refunded in accordance with the
procedures specified by the Department.
21. The value added tax shall be exempted in relation to imports of
such as required for not more than 3 megawatt small hydro
power projects and as are not produced in Nepal, on the
recommendation of the Alternative Energy Promotion Center, in
the case of those which are operated with the approval f that
Center, other not more than 3 megawatt projects on the
recommendation of the Electricity Development Department, in
the case of the industries except those which are operated with
the approval of the Alternative Energy Promotion Center.
22. The value added tax shall not be levied on transferring any motor
vehicles that were imported by any foreign mission or donor
agency with the enjoyment of the diplomatic facility or tariff
facility to the project itself in consonance with te approval
annual program of the project and converting their number plates
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into governmental ones or on transferring, with theapproval of
the Ministry of Finance, any motor vehicles that were imported in
the name of any project with the enjoyment of full or partial tariff
facility (except those imported on inventory or bank guarantee)
to any governmental body after the completion of the project and
converting their number plates into governmental ones.
23. If any diplomatic body, project or other body (governmental as
well as non-governmental organization) intends to scrap and
cancel the registration of any motor vehicle that it has imported
with the enjoyment of the tariff facility and that is more than 15
years old after the year of initial production, with the approval of
the Ministry of Finance, the value added tax shall not be levied
on such a motor vehicle.
24. If the owner of a motor vehicle imported by a citizen of Nepal for
personal use with the enjoyment of value added tax exemption
dies and the motor vehicle has to be transmitted to the husband
or wife of the owner of motor vehicle, the value adde tax shall
not be levied on such a motor vehicle on the basis of the approval
of the Department.
25. If any industries that have not enjoyed the facility of bonded
warehouse or passbook import the raw materials, subsidiary raw
materials, and packaging materials that are not produced in
Nepal, required for the production of goods to be exported by
them and export the goods produced from such raw materials in
accordance with such procedures and within such period as
prescribed, the value added tax levied on such raw materials,
subsidiary raw materials and packaging materials at the customs
points while importing them shall be refunded from the customs
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point in relation to such goods, from such a date and on such pro
rata as specified in a notice published in the Nepal Gazette.
26. If the Government of Nepal considers reasonable to grant any
exemption to any taxable goods or to refund tax, it may grant
such exemption by publishing a notice in the Nepal G zette.
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the
services provided by such entities carrying on business such as
hotels and guest houses)
Group 13: Betting, casinos and lotteries
Activities relating to facilities provided for the organization of
bets or gambling, and lottery.
Note:
The Department, as prescribed, and in consultation with the
Department of Customs, interpretation of the goods and services
enjoying tax emption and the Harmonized Code of Comm dities
as necessary.






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Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
2. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
3. Goods or services imported by a person or mission enjoying diplomatic
facility and a person serving in a diplomatic mission enjoying tariff
facility, on the recommendation of the Ministry of Foreign Affairs,
Government of Nepal.
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4. If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
shall be provided on such supplies, so long as suchtreaty or agreement
is in effect.
5. Raw materials to be sold to and goods manufactured by any industries
established pursuant to the laws in force and operated in the special
economic zone.
6. If, on the recommendation of the Alternative Energy Promotion Center,
the battery used in the equipment and mechanism generati g energy
from solar power is produced by any native industry and is to be
supplied by that industry, the facility of zero rate shall be provided on
that transaction on the recommendation of Alternative Energy
Promotion Center and in accordance with the procedures specified by
the Department.
7. If not more than 3 megawatt small hydro power projects are produced
by any native industry and are to be supplied by that industry, the
facility of zero rate shall be provided to that industry on that
transaction, on the recommendation of the Alternative Energy
Promotion Center, in the case of a project that is operated with the
approval of that Center, other not more than 3 megawatt projects on the
recommendation of the Electricity Development Department, in the case
of one other than that operated with the approval of the Alternative
Energy Promotion Center and in accordance with the procedures
specified by the Department.
8. If painting, handicrafts, carving and similar other handicrafts produced a
cottage and small scale industry within Nepal are exported through an
approved export trading house of Nepal, the value added tax paid on the
raw materials used in the manufacture of such goods shall be refunded
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after fulfilling the procedures specified by the Inla d Revenue
Department.

Financial Act, 2065 (2008)
Date of Authentication and Publication
2065.6.3 (19 Nov. 2008)
An Act Made to Implement Proposals Relating to Finance of the
Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal;
Now, therefore, be it enacted by the Constitution Assembly pursuant to
Sub-articles (1) of Article 83 of Interim Constitution of Nepal, 2063 (2006).
1. Short title and commencement: (1) This Act may be called the
“Financial Act, 2065 (2008)."
(2) This Act shall come into force immediately.
37. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) Of Section 2,-
(a) The following Clause (f1) shall be inserted after Clause
(f):
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“(f1) “Group of companies or entities” means a group of
companies or entities in relation to which the
following situation exists:
(a) If any business is carried on by a person or
agent member associated with the group of
entities,
(b) If any goods or services are supplied by the
group of entities to any entity or group of
other entities associated with it,
(c) If any goods or services are supplied to the
group of entity or member of the group,
(d) If the permanent address of operation of
business of any two or more than two
entitles is in the same place, or
(e) If the group of entities is controlled directly
or indirectly by any one person or some
persons.”
(b) The following Clause (h) shall be substituted for Clause
(h):
“(h) "Consideration" means anything to be obtained in
exchange for the price of any goods or services
being supplied.”
(c) The following Clause (h1) shall be inserted after Clause
(h):
“(h1) "Loan agreement" means a hire purchase agreement
or financial lease.”
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(d) The following Clause (k1) shall be substituted for Clause
(k):
“(k1) Electronic medium" includes approved means such
as the computer, fax, e-mail, internet, electronic
cash register/machine and fiscal printer.
(e) The following Clause (t) shall be substituted for Clause
(t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax
Officer and the Chief Tax Administrator appointed
by the Government of Nepal for the purpose of this
Act, and this term includes a section office, director
and deputy director at the Department or such
other officer designated by the Government of
Nepal authorizing to exercise the powers of Tax
Officer under this Act.”
(2) The following Section 4 shall be substituted for Section 4:
“4. Jurisdiction of the Tax Officer: (1) The jurisdiction of
Tax Officer shall be as prescribed by the Government of
Nepal.
(2) The Director General may also so designate a
Tax Office as to inspect and monitor also the transaction
of taxpayers in other areas than those falling under his or
her jurisdiction.”
(3) The following Section 5A. shall be substituted for Section 5A:
“5A. Tax not to be levied on transfer of ownership of
transactions: Notwithstanding anything contained
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elsewhere in this Act, in cases where a registered person
sells the transaction being carried out by him or her to any
other registered person or the transaction is transferred in
the name of his or her heir by virtue of death, such transfer
of ownership shall not be subject to tax. The person
registered in so selling or transferring the transaction shall
give information thereof to the Department as prescribed.
(2) Notwithstanding anything contained in Sub-
section (1), if any industry or business that is required to
be registered or has been registered pursuant to laws is
transferred, the transferee who obtains the ownership shall
bear the transferor’s liability of tax specified bylaw.
(3) The person who obtains ownership shall,
subject to Sub-section (3), bear the obligation of safely
maintaining the accounts, records and books of account f
the transaction of such an industry or business until the
prescribed period (before and after transfer) pursuant to
this Act.”
(4) The following Explanation shall be inserted in Clause (c) of Sub-
section (2) of Section 6:
“Explanation: For the purposes of this Clause, acquisition shall
be deemed in the following circumstance:
(a) Copyrights, patents, licenses, trademarks and
similar other rights,
(b) Advertisement services,
(c) Technical services, engineering services, services of
suppliers providing technical services, legal
services, accounting services, data and data
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processing services, information services and similar
other services.
(d) In supplying the services as referred to in Sub-
section (1) or accepting any liability or undertaking
or in exercising that undertaking fully or partly or
doing any business activities in exercise of such
right, or
(e) Insurance or reinsurance services other than the
facility of safe deposit.
(5) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of 13 percent.”
(6) The following Section 8A. shall be inserted after Section 8:
“8A. Provision of bank guarantee: (1) An industry that
exports more than Sixty percent of the total sale of the last
Twelve months after the operation of the industry may
make import by furnishing a bank guarantee with the
concerned Tax Office in consideration for tax while
importing the raw materials required to produce the goods
in the quantity of export, and import of goods to be
imported for a duty free shop through a bonded warehouse
may be made by furnishing a bank guarantee with the
concerned Tax Office in consideration for tax leviable on
such goods.
Provided that, except for the import by a duty free
shop through a bonded warehouse, in order for the or
exporter to avail such a facility, the exporter has to make
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finished goods from the raw materials, with Ten percent
value addition.
(2) Liquors and cigarettes imported through a
bonded warehouse availing the facility as referred to in
Sub-section (1) have to be sold only to the diplomatic and
tariff facility enjoying persons or bodies that are
recommended by the Government of Nepal, Ministry of
Foreign Affairs.
(3) Liquors and cigarettes in stock at the duty free
shop situated at the Tribhuvan International Airport at the
time of commencement of this Act may be transferred to
its own bonded warehouse that has been licensed or be
sold upon paying leviable tax.
(4) The bank guarantee furnished pursuant to Sub-
section (1) shall be released from the concerned Tax
Office in accordance with the procedures specified by the
Department.
(5) A person who enjoys the facility as referred to
in this Section shall not be entitled to the facility as
referred to in Sub-section (4) of Section 24.”
(7) The following Section 9 shall be substituted for Section 9:
“9. Exemption for small vendor: Notwithstanding anything
contained in the other provisions of this Act, an exemption
may be provided to a small vendor, having a prescribed
annual taxable transaction threshold, from the
requirements of registration and filing of tax returns and
from such requirements as may be prescribed.
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Provided that, if a small vendor wishes to have his
or her transaction registered voluntarily, he or she may
have such registration after completing the procedur s as
referred to in Section 10.”
(8) Of Section 10,-
(a) The following Sub-sections (1) and (2) shall be
substituted for Sub-sections (1) and (2):
“(1) A person who intends to be engaged in any
transactions has to make an application, in the prescribed
format, to the Tax Officer, for registration, prior to
commencing the transactions.
(2) If any goods transacted by a person is taxable or
if any person operates of hardware, sanitary, furnit e,
fixture, furnishing, automobiles, electronics, marble, and
color lab transactions within a Municipal Corporation,
Sub-municipal Corporation, Municipality or Depart or
within an area specified by the Department, the person has
to make an application in the prescribed format, to he Tax
Officer, for registration, within Thirty days after the date of
imposition of such tax or the date of commencement of the
transactions.”
(b) The word “application” shall be substituted forthe word
“petition” contained in Sub-section (4).
(9) The following Section 10A. shall be inserted after Section 10:
“10A. Special provision relating to provisional registration:
(1) In the case of an exhibition, fair and similar other
transaction to be organized temporarily, the organizer and
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any entrepreneur who carries on the transaction of any
taxable goods or services in such an exhibition or fair and
is not registered with the Value Added Tax shall have to
be registered with the Value Added Tax. In the case of a
person who is so registered, the Tax Officer may requir a
deposit in consideration for security.
(2) An entrepreneur who has been registered with
the Value Added Tax since previously pursuant to Sub-
section (1) may take back through stock transfer th goods
exhibited in that program.
(3) A tax payer who has been registered only for
the program as referred to in Sub-section (1) shall have to
cancel the temporary registration by furnishing the details
of transaction and paying all the leviable tax within Seven
days after the completion of the organized exhibition or
fair.”
(10) Of Section 11,-
(a) Of Sub-section (1),-
(1) The following Clause (c) shall be substituted
for Clause (c):
“(c) In the case of a partnership firm, if
such partnership firm is dissolved or
the partner dies,”
(2) The following Clause (d1) shall be inserted
after Clause (d):
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“(d1) If the taxpayer is one who gives zero
return or does not give return at all
within a consecutive period of One
year,”
(3) The following Sub-section (1b) shall be
inserted after Sub-section (1a):
“(1b) A taxpayer has to submit his or her
documents for auditing within fifteen days of
the submission of the tax returns for
cancellation of registration, and the Tax
Officer shall perform the audit of such a
taxpayer, cancel the registration within
Three months or if registration is not to be so
cancelled, the Tax Officer shall give
information thereof to the taxpayer. If the
Tax Officer does not cancel registration or
make decision to cancel registration within
that period, the taxpayer is not obliged to
furnish the tax returns subsequent to that
period.”
(b) The following Sub-section (3) shall be
substituted for Sub-section (3):
“(3) Out of the goods that have already
enjoyed the tax deduction facility, the stock
(capital goods as well) remain available for
use at the time of the cancellation of
registration shall be deemed supplied at the
market price and tax shall be assessed and
recovered accordingly.
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Explanation: For the purposes of this Sub-
section, “capital goods” shall mean any
property or any part of property and
property that is used in taxable
transactions.”
(c) The following Sub-section (4) shall be
substituted for Sub-section (3):
“(4) If any act and liability as required to
be performed and borne pursuant to this Act
shall be due by the reason of commission or
omission of any act at the time of carrying on
taxable transaction, the cancellation of
registration of such a taxpayer shall not in
self result in the exemption from the
consequence of such a liability.”
(11) The following Clause (b) shall be substituted for Clause (b) of
Sub-section (2) of Section 12:
“(b) Excise duty, ownership fee and other taxes save the tax
imposed under this Act.”
Explanation: For the purposes of this Clause, "other tax
amounts" means such tariffs, fees and charges as are
specified and levied by the yearly Financial Act.
(12) The following Section 12A. Shall be inserted after Section 12:
“12A. Taxable value of timber transaction: (1) There shall be
levied and collected tax on the amount of royalty of the
timber of national forest or the amount of auction,
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whichever is higher, at the time of auction, release or saw
order, whichever is earlier.
(2) If the timber of a personal cultivated, private
forest or community forest for business purpose and
despite that royalty is not chargeable, tax shall be eviable
as if it were the timber of national forest.”
(13) Of Section 14,-
(a) The following proviso shall be inserted in Sub-section (1):
“Provided that, a person who carries on annual
transaction of more than One Million Rupees shall issue
invoices with serial number and permanent accounts
number as well as his or her name, and address despite
that he or she is not registered.”
(b) The following Sub-sections (4), (5), (6) and (7) shall be
inserted after Sub-section (3):
“(4) One who transports goods attracting tax of
more than Ten Thousand Rupees outside the area
specified by the Department shall hold tax invoices with
him or her.
(5) The Department may order taxpayers to issue
invoices by using a cash machine or computer. Other
procedures on so issuing invoices by using a cash machine
or computer shall be as prescribed by the Department.
(6) The Department may, by publishing a notice or
giving an order in writing, so specify that any person
specified by such a notice or order has to make public the
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retail sale value or price of any such goods as specified in
that order or notice for such period as specified therein.
No sale or transfer of any goods shall be made without
making public the retail sale price after the receipt of such
a notice or order.
(7) Provision shall be made that any person
specified pursuant to Sub-section (6) shall, in selling such
goods to any unregistered persons, have to issue invoices
of the price made public in the specified format and
collect also the tax at the consumer level.
Provided that, any persons not so specified
pursuant to Sub-section (6) may issue invoices as referred
to in this Sub-section.”
(14) The following Sub-section (3) shall be inserted after Sub-section
(2) of Section 15:
“(3) Notwithstanding anything contained in Sub-
sections (1) and (2), a Local Body or Government of Nepal
shall have to collect or recover tax at the time of sale of taxable
goods or services.
(15) Of Section 16:
(a) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) The Department may have continuous access
to the computer database of taxpayers.”
(b) The following Sub-section (3a) shall be inserted after Sub-
section (3):
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“(3a) A person who carries on the transactions of
taxable goods or services but is not registered has him elf
or herself certify the account of purchase and sale for ach
financial year. The Tax Officer may at any time examine
such an account.”
(16) The following Section 16A. Shall be substituted for Section 16A:
“16A. Records processed by computer to be eligible as
evidence: (1) Notwithstanding contained in the laws in
force, the records relating to taxpayer processed by the
computer installed in the Department or offices thereunder
shall be eligible as evidence for purposes of tax, except as
otherwise proved.
(2) The Department may by publishing a notice,
make necessary arrangements on the issuance of invoices,
maintenance of accounts, submission of tax returns and
payment through electronic medium."
(17) The following Section 16B. shall be inserted after Section 16A:
“16B. Deduction of tax paid on goods in the event of loss: In
the event of loss and damage due to arson, theft, accident,
wear and tear, disruptive activity or expired the date of
uses goods of value added tax paid on the goods shall be
deducted as prescribed.”
(18) Of Section 17,-
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
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“(2) Notwithstanding anything contained in Sub-
section (1), it may be provided that no deduction or only a
partial deduction may be granted in the case of the
prescribed goods that can be used for personal purpose or
for business purpose or for both purposes.”
(b) The following Sub-section (5a) shall be substituted for
Sub-section (5a):
“(5a) The concerned taxpayer shall be allowed to
deduct tax paid on the capital goods that were imported or
purchased by entering into a loan agreement under
financial lease subject to Sub-section (2).”
(c) The following Sub-section (5b) shall be inserted after
Sub-section (5a):
“(5b) The concerned taxpayer shall be allowed to
deduct tax paid pursuant to Section 12A. and Sub-section
(3) of Section 15.”
(d) The following Sub-section (8) shall be inserted after Sub-
section (7):
“(8) Notwithstanding anything contained
elsewhere in this Section, the name of a taxpayer who
does not submit the tax returns for Six months
consecutively shall be made public, and if there is any
amount due for tax deduction by such a taxpayer, such
amount may be suspended and his or her registration may
also be suspended.”
(19) Of Section 18,-
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(a) The words “or by registered post” shall be inserted after
the words “before the Tax Officer” contained in Sub-
section (1).
(b) The following Sub-sections (1a) shall be inserted after
Sub-section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), a taxpayer in a district where there is no
Inland Revenue Office may furnish the amount of tax
returns to be paid and submitted by him/her with the
Office of Funds and Accounts Controller of the same
district within the Fifteenth day of the month in which
he/she has to furnish the tax returns paying the tax. The
Office of Funds and Accounts Controller shall forwad the
returns of tax and payment of tax so received to the Inland
Revenue Office within Seven days.”
(20) Of Section 19,-
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a taxpayer does not pay the tax within the
time limit specified in Sub-section (1), an extra charge of
Ten percent per annum shall be imposed on the amount of
tax due and outstanding.”
(b) Sub-section (3) is, hereby, deleted.
(c) The words “pursuant to Sub-section (2)” shall be
substituted for the words “pursuant to Sub-section (2) or
(3)” contained in Sub-section (4).
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(d) The words “pursuant to Sub-section (2)” shall be
substituted for the words “pursuant to Sub-section (2) or
(3)” contained in Sub-section (5).
(21) Of Section 20,-
(a) The following Clauses (f), (g), (h) and (i) shall be inserted
after Clause (e) of Sub-section (1):
“(f) If supply is made to the group company by making
under invoicing,
(g) If transaction is carried out by a person required to
be registered without being so registered,
(h) If sale is made without issuing invoices,
(i) If tax is collected by an unregistered person.”
(b) The following Sub-section (4) shall be substituted for
Sub-section (4):
“(4) In assessing the tax pursuant to Sub-section
(1), tax assessment shall have to be made within Four
years from the date of submission of the tax returns. If the
tax assessment cannot be made within that period, the
returns so filed shall ipso facto be considered to be valid.”
(c) The following Sub-section (4a) shall be inserted after Sub-
section (4):
“(4a) Notwithstanding anything contained in Sub-
section (4), where any person has evaded tax by preparing
false accounts or invoices or other documents or by f aud,
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the Department may at any time issue an order for the
reassessment of tax.”
(22) Of Section 21,-
(a) The following Clause (c) shall be substituted for Clause
(c) of Sub-section (1):
“(c) By selling all or some of the properties of the
taxpayer through sealed quotations or auction at
the same time or various times.”
(b) Sub-section (2) shall be deleted.
(23) The following Section 22A. shall be inserted after Section 22:
“22A. Provision against tax evasion plan: Notwithstanding
anything contained elsewhere in this Act, if any taxpayer
commits any of the following acts with mala fide inte tion
to take advantage of tax, the taxpayer shall be deemed to
have committed enticement to evade tax through tax
exemption scheme, and the Director General may order
the Tax Officer to assess the tax of such a taxpayer nd
recover the same:
(a) To lessen the liability of tax by making or doing
any scheme or act with mala fide intention to evade
tax by manipulating any provision contained in this
Act,
(b) If any person or entity does any act with mala fide
intention to lessen the liability of tax or enters into
agreement with that intention.”
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(24) The following Sections 23C. and 23D. shall be inserted after
Section 23B.:
“23C. Purchase of goods of under invoicing: (1) If any person
sells any goods by under invoicing, showing the selling
price lesser than the prevailing market price, the Tax
Officer shall, notwithstanding anything contained in the
laws in force, withhold the goods in stock similar to those
goods so under invoiced and sold and the Inland Revenue
Office may purchase or cause to be purchased the sam at
the price under invoiced and sold.
(2) If, in purchasing or caused to be purchased th
goods by the Department or Office pursuant to Sub-
section (1), such a person does not agree to sell the goods,
the Department of office shall take such goods in its
custody, make calculation on the basis of the price at
which they were under invoiced and sold and make
payment when such a person shows up to receive
payment.
(3) The goods purchased or caused to be purchased
pursuant to Sub-sections (1) and (2) may be sold or
caused to be sold at such price and in accordance with
such procedures as may be specified by the Director
General.”
“23D. Power to make search, seizure or demand deposit or
security: (1) If the Tax Officer finds that any person, firm,
company or organization has done transaction by evading
tax and there is a possibility that the accused may go away
or the evidence and proof of offence may disappear, the
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Tax Office may, with the approval of the Director General,
do or cause to be done any of the following acts:
(a) To seal the place of transaction,
(b) To take custody of the electronic equipment
or records thereof,
(c) To demand cash deposit or wealth guarantee
in a sum equivalent to the tax evaded from
the person believed to have committed the
offence, by executing a memorandum to that
effect,
(d) To withhold the bank account in the name
of taxpayer for up to Three months.
(2)The Tax Officer shall have the same powers as the
police may exercise under the laws in force in relation to the
investigation of offences pursuant to this Act.”
(25) The following Sub-section (5) shall be substituted for Sub-
section (5) of Section 24:
“(5) On the submission of an application pursuant to Sub-
section (3) or (4), the Tax Officer shall refund immediately the
amount held to be refundable, and if such an amount is not
refunded within Thirty days after the date of submission of
application in relation to the matter referred to in Sub-section (3)
and within Sixty days in relation to the matter refe red to in Sub-
section (4), the Government of Nepal shall have to pr vide
interest on that amount, as prescribed.”
(26) The following Section 24A. shall be inserted after Section 24:
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“24A. Tax not to be refunded: (4) Notwithstanding anything
contained in Section 24, if an application is not made for
the refund of the amount refundable pursuant to this Act
within Three years after the date of expiration of the
period of tax, such refund shall not be made.”
(27) Of Section 25,-
(a) The following Clause (a) shall be substituted for Clause
(a) of Sub-section (1):
“(a) If a foreign county grants on reciprocity that t x
exemption facility to Nepalese diplomats whom the
Government of Nepal, Ministry of Foreign Affairs,
has granted diplomatic recognition or to persons
enjoying diplomatic facility and serving in regional
or international missions or institutions, the amount
of tax paid by the Nepal based diplomats of such
country or regional or international missions or
institutions to the extent of consumption by them.”
(b) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), the tax paid by a diplomatic body or diplomat
on the purchase of taxable goods or services shall not be
refunded if the amount purchase is less than One
Thousand Five Hundred Rupees at one time.”
(28) The following Sections 25A. shall be inserted after Section 25:
“25A. Refund of tax paid by foreign tourist on purchase: If a
foreign tourist visiting Nepal and returning by air
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purchases taxable goods of more than Fifteen Thousand
Rupees and takes them with him or her, the tax paidon
such goods shall be refunded in accordance with the
procedures specified by the Department.
(29) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of interest
shall be Fifteen per cent per annum.”
(30) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 28:
“(1a) If any goods manufactured or prepared within
Nepal, after the completion of export procedures by the Customs
Office or after reaching a foreign country, are re-imported
because of rejection by the concerned party or other reason, and
the same goods are to be exported within Three months of the
import, the goods may be released against the deposit of the value
added tax leviable at the time of such return, and the deposit
shall be refunded after the re-export of such goods. The
concerned Customs Office shall provide the details of amount so
furnished as a deposit and refunded to the Inland Revenue
Office.”
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(31) Of Section 29,-
(a) Of Sub-section (1),-
(1) The following Clause (a) shall be substituted for
Clause (a):
“(a) In the event of violation of Sub-section (1)
or (2) of Section 10, Ten Thousand Rupees
for every tax period.”
(2) The following Clause (b1) shall be inserted after
Clause (b):
“(b1) In the event of failure to place a tax
board in accordance with this Act or the Rules
framed under this Act, a fine of Two Thousand
Rupees for each week and in the event of failure to
place it at the designate place, a fine of One
Thousand Rupees.”
(3) The following Clause (c) shall be substituted for
Clause (c):
“(c) In the event of violation of Sub-sections (1)
and (4) of Section 14, Five Thousand
Rupees for each instance.”
(4) The following Clause (d) shall be substituted for
Clause (d):
“(d) In the event of violation of Section 15, cent
percent amount of tax collected.”
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(5) The following Clause (g1) shall be inserted after
Clause (g):
“(g1) In the event of violation of Sub-section (3a)
of Section 16, One Thousand Rupees for
each instance.”
(b) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) In the event of lessening tax liability without
observing this Act or the Rules framed under this
Act, the Tax Officer may fine up to Twenty Five
percent of the amount of tax, on the grounds as
specified by the Department.”
(2) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a person commits any of the following offences,
the Tax Officer may impose a fine of cent percent of
the amount of tax or an imprisonment up to Six
months or both the fine and the imprisonment on
such a person:
(a) Preparing false accounts, invoices or other
documents;
(b) Committing an evasion of tax by fraud;
(c) If an unregistered person acts as if he or she
were a registered person;
(d) Infringing Section 23C.;
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(e) Carrying out a transaction by infringing
Section 30.”

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(32) The following Section 29A. shall be inserted after Section 29:
“29A. Power of Department to order to furnish the amount
of fine: (1) Notwithstanding anything contained elsewhere
in this Act, if any person, prior to the commencement of
proceedings of action, admits in writing that he or she has
committed another offence or more than such offence set
forth in Sub-section (2) of Section 29, the Department my
order such a person to furnish the amount of fine not
exceeding the amount of fine imposable for the
commission of such an offence.
(2) In issuing order as referred to in Sub-section
(1), such an order has to set out the details of such
offence, amount of fine to be paid and date for payment of
the amount of fine.
(3) An order issued by the Department pursuant to
this Section shall be final.”
(33) The following Section 30A. shall be inserted after Section 30:
“30A. Power to order for reassessment of tax: (1) In cases
where, before tax is assessed, it appears from the
information given to the Director General that any action
relating to the assessment of tax is about to be irregular or
has been irregular, the Director General may, by executing
a memorandum clearly setting out the reasons, give
direction to the concerned Tax Officer to make
reassessment of tax or order any other Tax Officer to do
that act.
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(2) In cases where it appears that tax liability has
increased because of tax assessment made by the Tax
Officer recklessly or with mala fide intention, the Director
General may give order to amend such tax assessment
order within Four months after the date of initial t x
assessment.”
(34) The following Section 31A. shall be substituted for Section 31A:
“31A. Application may be made for administrative review:
(1) A person who is not satisfied with any decision of tax
assessment made by the Tax Officer may make an
application to the Department against the decision within
Thirty days of the date of receipt of a notice of that
decision.
(2) In cases where the time limit for making
application pursuant to Sub-section (1) expires andy
person makes an application for the extension of time l mit
within Seven days from the date of expiration of the ime
limit, the Department may extend the time limit for a
period not exceeding Thirty days from the date of
expiration of the time limit.
(3) If the claim of the applicant appears to be true
upon examining the evidence and documents including the
application made by the taxpayer pursuant to Sub-section
(1), the Director General may, by executing a
memorandum setting out the clear reasons, void that tax
assessment order and direct the concerned Tax Officer to
make re-assessment of tax or order any Tax Officer to do
that act.
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(4) The Department shall make decision on the
application within Sixty days after the date of making of
application pursuant to Sub-section (1).
(5) If the Department does not give decision within
the time limit as referred to in Sub-section (4), the
concerned person may make an appeal to the Revenue
Tribunal pursuant to Section 32.
(6) The taxpayer who makes an application
pursuant to Sub-section (1) has to pay undisputed amount
of tax, out of the amount of tax assessed, and furnish a
cash deposit of One Third of the amount of tax in
controversy.
(7) In cases where excess of the amount to be
furnished pursuant to Sub-section (1) has been furnished
prior to the making of application, only the remaining
amount upon deduction of the amount covered by that
amount may be furnished as deposit.
(35) The following Section 32 shall be substituted for Section 32:
“32. Appeal in the Revenue Tribunal: (1) A person who is
not satisfied with an order of suspension made by the
Director General pursuant to Section 30 or a decision
made by the Department pursuant to Sub-section (4) of
Section 31A. may file an appeal in the Revenue Tribunal
according to the Revenue Tribunal Act,2031.
(2) The person who files an appeal pursuant to
Sub-section (1) has to register a copy of the appeal with
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the Department within Fifteen days of the date of filing
appeal.”
(36) The following Section 32A. shall be inserted after Section 32:
“32A. Advance ruling: (1) If any person makes an application in
writing to the Department for the removal of any
confusion as to the application of this Act, the Department
may issue its version by an advance ruling as prescribed,
by notifying the person in writing.
(2) Notwithstanding anything contained in Sub-
section (1), the Department shall not be entitled to issue
an advance ruling referred to in Sub-section (1) on any
matter of confusion occurred in the implementation of this
Act in cases where such matter is sub judice in the court
or has already been decided by the court.
(37) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of
Nepal may obtain the service of the concerned expert for
the act related to tax auditing; and the provision
governmental secrecy mentioned in Section 37 shall also
apply to such an expert.”
(38) The following Sub-section (1) shall be substituted for Sub-
section 91) of Section 40:
“(1) A person who provides information, along with
evidence, showing that a taxpayer has evaded or attemp ed to
evade all or some portions of his or her tax liabilty may be
awarded, by a decision of the Director General, as reward the
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amount that is equal to Twenty per cent of the amount of tax
recovered on the basis of that information."
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(39) The following Schedule-1 and Schedule-2 shall be substituted
for Schedule-1 and Schedule-2:
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“ Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice, wheat, maize, barley, millet, buckwheat, pulses,
flour, rye flour, grains, paddy flakes, peas, chickpeas, kidney
peas, beans and similar basic unprocessed food materials and
their extracts.
(b) Green and fresh vegetable, fresh fruits, fresh eggs, tuberous roots,
and fruits, vegetables and as use in vegetable and tuberous roots,
fresh and unprocessed agro-products. (Except those t be
supplied hotels, restaurants, bars, guest houses, cafeteria and
other similar organizations).
(c) Unprocessed cash crops/cereals (such as sugarcane, cotton,
cardamom, ginger and saffron, flax, unprocessed tobacco, tea leaf
sold by farmers, tea chest, coffee, soybean, ground-nuts,
turmeric, oil-cake and other solid residues.
(d) Herbs (including their extracts).
Group 2. Goods of Basic Needs:
(a) Piped water, including water supplied by tankers.
(b) Fuel wood.
(c) Coal.
(d) Salt.
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Group 3. Live Animals and animal products
(a) Goats, sheep and mountain goats , yak and buffalos , bore and
pigs , rabbit and their unprocessed raw edible food items.
(b) Cows and she buffalos, she goats, and their fresh milk, (including
pasteurized), curd, bees and bee hives and bee keeping
machinery, including germination plant, metal barrel, bee brush,
base roller, gear pump and wheel plate and bee harvesting or
threshing machinery.
(c) Ducks, hens, cocks, turkey and similar other birds their fresh
meat and unprocessed raw items and eggs.
(d) Fresh or dried fish (except other than packed).
4. Agricultural inputs
(a) Crops, grasses, flowers or live trees and other plants, bulbs,
tubers, tuberous roots and bulbs and roots used as seeds.
(b) Manure, fertilizer and soil conditioners.
(c) Hand tools, spades, shovels, mattocks, picks, hoes, forks and
rakes, axes, bill hooks and similar hewing tools, secateurs of any
kind, scythes, sickles, hay knives, other than hand saws, hedge
shears, timber wedges, ploughshare and other tools of a kind used
in agriculture.
(d) Insecticides, rodenticides, fungicides, herbicides and de-ratting
drugs as mentioned in Chapter 38 of Customs Tariff used only for
crops.
(e) Use in agriculture function Tractors, cultivators, tantalum,
levelers, harvesting or threshing machine, threshers, fishing nets,
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ready-made cages for aquaculture, fish incubators, pumping sets
with engines from Two to Eight horse power and up to 30 meters
hose pipe accompanied with the sets, used in irrigation works.
(f) Raw materials of deed supplements falling under Chapters 23, 28
and 29 of the Customs Tariff, animal feeds and feedsupplements
falling under Chapter 23 of the Customs Tariff, and lime stone
dust, bone dust and fish dust falling in Chapter 25.
(g) Special kind of utensils for feeding poultry feed except normal or
general utensils, and special kinds of utensils for feeding water to
poultry.
Group 5. Medicine, Medical and Similar Health services
(a) Health services.
(b) Human blood and human blood items and vaccines.
(c) Human or animal organs or tissue for medical research.
(d) Medicaments for treatment of livestock and human beings and
family planning means.
(e) Pacemakers used in treatment of heart diseases, stint, valve of
heart, goods made for, and suitable only for the us of, infirm
and disabled persons.
(f) X-ray film and oxygen gas to be used for treatment, bandage, and
(g) Raw materials for drug industries and production of Intra
Ocular Lance (I.O.L.): metal salts, oxides and hydro-oxides used
by drug industries and in the production of IOL, falling under
Chapter 28 of the Customs Tariff, as well as raw materi ls of
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drugs (active ingredients of drugs) and raw materials used by drug
industries in production of drugs and packing materi ls.
Group 6: Education
(a) Research related acts in schools or universities
(b) Getting purpose for non-profit, Vocational or professional
trainings or refresher trainings
(c) Educational services provided by schools and universities.
Group 7: Books, newspapers and printed materials
(a) Books, calendars, newsletters (headings 49.01, 49.02, 49.04) and
printing and publication thereof,
(b) Newsprint (heading 48.01)
Group 8: Artistic and cultural goods and services, carving services
(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programs,
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
Group 9: Passengers and goods transportation services
Air transport, passenger transportation (except cabal car) and goods
carrier service (except transportation related to supply).
Group 10: Personal or Professional service:
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Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually, and
services of supplying human resources to foreign countries.
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Group 11: Other goods or services:
1. Postal services (only those provided by the Governm nt of
Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets.
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packets.
(c) Postage stamps.
(d) Services provided by the Government of Nepal.
2. Excise duty stamp, cash machine and passport.
3. Financial services and life insurance services.
4. Bank notes, coins and cheque books:
(a) Printing and issue of bank notes.
(b) Supply of bank notes from foreign countries into Nepal.
(c) Cheque books.
5. Gold and silver:
(a) Gold, gold coins, gold ornaments and diamond ornaments.
(b) Silver and silver coins, silver ready-made goods and
ornaments.
6. Electricity supply.
7. Raw wool.
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8. Battery operated tempo and their chassis.
9. Bio-gas, solar power and wind power operated power generation
plants and their equipment and tubular battery, on the
recommendation of the Alternative Energy Promotion Centre.
10. Aircrafts and helicopters and their engines, gear box, fire
brigades, ambulances and corpse carrying vehicles.
11. Jute batching oil and jute products.
12. Mills, machineries and equipment, molding keys (except spare
parts) other than those that can be used in household attracting
up to 5 percent customs duty as falling under Part 84 of the
Customs Tariff.
13. Woolen carpet and woolen carpet weaving, dying, washing and
knitting.
14. 100 percent cotton sari, Lungi, Dhoti (for both men and
women), Gamcha and cotton yarn.
15. Woolen yarn to be used in hand knitting sweater (except artificial
and acrylic) domestically.
16. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
17. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
18. Amount equal to such tax as deemed payable that remains
balance upon deducting the tax paid on purchase from the tax
collected on the sale of goods by textile, match (only wooden
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stick) and tyre-tube industries shall be refunded to these
industries in accordance with the procedures specified by the
Department.
19. Only Fifty percent of the amount equal to such tax as deemed
payable that remains balance upon deducting the tax paid on
purchase from the tax collected on the sale of products
(sugarcane and flour) by sugarcane and flour industries shall be
refunded to these industries in accordance with the procedures
specified by the Department.
20. Fifty percent value added tax of the value added tax collected by
domestic industries producing goods (mustard oil) on selling their
products of mustard oil and by industries producing Vanaspati
ghee and other processed edible oil domestically to be refunded
to these industries in accordance with the procedures specified by
the Inland Revenue Department.
21. If any native industry that manufactures cellular mobile phone
sets and importer thereof submits evidence that they have sold
the tax paid on the raw materials of cellular mobile phone sets or
readymade goods to Fifty percent shall be refunded in
accordance with the procedures specified by the Department.
22. The value added tax shall be exempted in relation to imports of
such penstock pipes or iron sheets used in making thereof as
required for hydro power projects and as are not prduced in
Nepal, on the recommendation of the Alternative Energy
Promotion Center, in the case of those which are operated with
the approval of that Center, and on the recommendation of the
Electricity Development Department, in the case of the industries
except those which are operated with the approval of the
Alternative Energy Promotion Center.
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23. The value added tax shall not be levied on transferring any motor
vehicles that were imported by any foreign mission or donor
agency with the enjoyment of the diplomatic facility or tariff
facility to the project itself in consonance with te approval
annual program of the project and converting their number plates
into governmental ones or on transferring, with theapproval of
the Ministry of Finance, any motor vehicles that were imported in
the name of any project with the enjoyment of full or partial tariff
facility (except those imported on inventory or bank guarantee)
to any governmental body after the completion of the project and
converting their number plates into governmental ones.
24. If any diplomatic body, project or other body (governmental as
well as non-governmental organization) intends to scrap and
cancel the registration of any motor vehicle that it has imported
with the enjoyment of the tariff facility and that is more than 15
years old after the year of initial production, with the approval of
the Ministry of Finance, the value added tax shall not be levied
on such a motor vehicle.
25. If the owner of a motor vehicle imported by a citizen of Nepal for
personal use with the enjoyment of value added tax exemption
dies and the motor vehicle has to be transmitted to the husband
or wife of the owner of motor vehicle, the value adde tax shall
not be levied on such a motor vehicle on the basis of the approval
of the Department.
26. If any industries that have not enjoyed the facility of bonded
warehouse or passbook import the raw materials, subsidiary raw
materials, and packaging materials that are not produced in
Nepal, required for the production of goods to be exported by
them and export the goods produced from such raw materials in
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accordance with such procedures and within such period as
prescribed, the value added tax levied on such raw materials,
subsidiary raw materials and packaging materials at the customs
points while importing them shall be refunded from the customs
point in relation to such goods, from such a date and on such pro
rata as specified in a notice published in the Nepal Gazette.
27. The following goods to be imported in the name of Nepal Army,
Armed Police Force and Nepal Police Headquarters shall enjoy
exemption, on the recommendation of the concerned Ministry:
(a) Ammunitions, arms, gunpowder and their spare parts,
special kind of oil, accessories, explosives to be us d by
Nepal Army, Armed Police Force and Nepal Police, raw
materials required to produce army materials and
machineries, tools and spare parts used for security.
(b) Machineries and equipment required for maintaining peace
and security, crowd control materials, equipment and
other goods required for the investigation of crimes, and
communication materials to be used by personnel of Nepal
Army, Armed Police Force and Nepal Police, on the
recommendation of the Ministry of Communication.
(c) Such equipment, materials, drugs and related goods as
required for the treatment of Army personnel, armed
police and Nepal police personnel and of horses.
(d) Goods used in the exercise and training of Army, armed
police and Nepal police personnel.
(e) Heavy earth moving plant, tool and parts related thereto,
optical equipment used in engineering survey and
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construction works carried out by Nepal Army, and such
defense store goods as specified by the Ministry of
Defense.
(f) Camping equipment used by Nepal Army and various
goods required for special force and paratroopers.
(g) Aircrafts, helicopters and their spare parts, parachute
(including bags), tools, lubricants and ground equipment
imported in the name of Nepal Army.
(h) Equipment and tools required for the operation f
hospitals.
(i) Goods required for scientific laboratories.
(j) Goods used in natural calamity relief works.
28. If the Government of Nepal considers reasonable to grant any exemption
to any taxable goods or to refund tax, it may grant such exemption by
publishing a notice in the Nepal Gazette.
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the
services provided by such entities carrying on business such as
hotels and guest houses)
Group 13: Betting, casinos and lotteries
Activities relating to facilities provided for the organization of
bets or gambling, and lottery.
Note:
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The Department, as prescribed, and in consultation w th the Department
of Customs, interpretation of the goods and services enjoying tax
emption and the Harmonized Code of Commodities as necessary.

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Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
2. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
3. Goods or services imported by a person or mission enjoying diplomatic
facility and a person serving in a diplomatic mission enjoying tariff
facility, on the recommendation of the Ministry of Foreign Affairs,
Government of Nepal.
4. If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
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shall be provided on such supplies, so long as suchtreaty or agreement
is in effect.
5. Raw materials to be sold to and goods manufactured by any industries
established pursuant to the laws in force and operated in the special
economic zone.
6. If, on the recommendation of the Alternative Energy Promotion Center,
the battery used in the equipment and mechanism generati g energy
from solar power is produced by any native industry and is to be
supplied by that industry, the facility of zero rate shall be provided to
that industry on that transaction on the recommendation of Alternative
Energy Promotion Center and in accordance with the procedures
specified by the Department.
7. If penstock pipes or iron sheets used in making thereof required for
hydro power projects are produced by any native industry and are to be
supplied by that industry, the facility of zero rate shall be provided to
that industry on that transaction, on the recommendation of the
Alternative Energy Promotion Center, in the case of a project that is
operated with the approval of that Center, and on the recommendation
of the Electricity Development Department, in the case of one other
than that operated with the approval of the Alternative Energy
Promotion Center and in accordance with the procedures specified by
the Department.
8. If painting, handicrafts, carving and similar other handicrafts produced a
cottage and small scale industry within Nepal are exported through an
approved export trading house of Nepal, the value added tax paid on the
raw materials used in the manufacture of such goods shall be refunded
after fulfilling the procedures specified by the Inla d Revenue
Department.
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9. The following (3) and (4) is repealed which information published in
Nepal gazette of Finance Ministry at dated 2065.2.5 in supplement
issue (3b), Clause 58 of part 5.

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Financial Act, 2066 (2010)
Date of Authentication and Publication
2066.3.29 (13 July 2009)

An Act Made to Implement Proposals Relating to Finance of the
Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal;
Now, therefore, be it enacted by the Constitution Assembly pursuant to
Sub-articles (1) of Article 83 of Interim Constitution of Nepal,2063 (2007).
1. Short title and commencement: (1) This Act may be called the
“Financial Act, 2067 (2010)."
(2) Sections 1, 2, 3, 4, 5 and 10 of this Act shall be deemed to
have come into force immediately and the other Sections on 1 Shrwan
2066(17 July 2009).
30. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) Of Section 2,-
(a) The following Clause (f1) shall be inserted after Clause
(f):
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“(f1) “Group of companies or entities” means a group of
companies or entities in relation to which the
following situation exists:
(a) If any business is carried on by a person or
agent member associated with the group of
entities,
(b) If any goods or services are supplied by the
group of entities to any entity or group of
other entities associated with it,
(c) If any goods or services are supplied to the
group of entity or member of the group,
(d) If the permanent address of operation of
business of any two or more than two
entitles is in the same place, or
(e) If the group of entities is controlled directly
or indirectly by any one person or some
persons.”
(b) The following Clause (h) shall be substituted for Clause
(h):
“(h) "Consideration" means anything to be obtained in
exchange for the price of any goods or services
being supplied.”
(c) The following Clause (h1) shall be inserted after Clause
(h):
“(h1) "Loan agreement" means a hire purchase agreement
or financial lease.”
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(d) The following Clause (k1) shall be substituted for Clause
(k):
“(k1) Electronic medium" includes approved means such
as the computer, fax, e-mail, internet, electronic
cash register/machine and fiscal printer.
(e) The following Clause (t) shall be substituted for Clause
(t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax
Officer and the Chief Tax Administrator appointed
by the Government of Nepal for the purpose of this
Act, and this term includes a section office, director
and deputy director at the Department or such
other officer designated by the Government of
Nepal authorizing to exercise the powers of Tax
Officer under this Act.”
(2) The following Section 4 shall be substituted for Section 4:
“4. Jurisdiction of the Tax Officer: (1) The jurisdiction of
Tax Officer shall be as prescribed by the Government of
Nepal.
(2) The Director General may also so designate a
Tax Office as to inspect and monitor also the transaction
of taxpayers in other areas than those falling under his or
her jurisdiction.”
(3) The following Section 5A. shall be substituted for Section 5A:
“5A. Tax not to be levied on transfer of ownership of
transactions: Notwithstanding anything contained
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elsewhere in this Act, in cases where a registered person
sells the transaction being carried out by him or her to any
other registered person or the transaction is transferred in
the name of his or her heir by virtue of his or herd ath,
such transfer of ownership shall not be subject to tax. The
person registered in so selling or transferring the
transaction shall give information thereof to the
Department as prescribed.
(2) Notwithstanding anything contained in Sub-
section (1), if any industry or business that is required to
be registered or has been registered pursuant to laws is
transferred, the transferee who obtains the ownership shall
bear the transferor’s liability of tax specified bylaw.
(3) The person who obtains ownership shall,
subject to Sub-section (3), bear the obligation of safely
maintaining the accounts, records and books of account f
the transaction of such an industry or business until the
prescribed period (before and after transfer) pursuant to
this Act.”
(4) The following Explanation shall be inserted in Clause (c) of Sub-
section (2) of Section 6:
“Explanation: For the purposes of this Clause, acquisition shall
be deemed in the following circumstance:
(a) Copyrights, patents, licenses, trademarks and
similar other rights,
(b) Advertisement services,
(c) Technical services, engineering services, services of
suppliers providing technical services, legal
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services, accounting services, data and data
processing services, information services and similar
other services.
(d) In supplying the services as referred to in Sub-
section (1) or accepting any liability or undertaking
or in exercising that undertaking fully or partly or
doing any business activities in exercise of such
right, or
(e) Insurance or reinsurance services other than the
facility of safe deposit.
(5) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of 13 percent.”
(6) Of Section 8:
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) A person, whether registered or not, who is
the recipient of services from a person who is not
registered and is outside Nepal shall have to assess and
collect tax at the taxable value in accordance withthis Act
and the Rules framed under this Act.”
(b) The following Sub-section (3) shall be inserted after Sub-
section (2):
“(3) Even though the construction of a building or
apartment or shopping complex and similar other structure
as specified by the Department, of which value is more
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than Five Million Rupees, and which is built for business
purpose is procured from a person who is not registred,
tax shall be assessed and collected from a person wh has
ownership in that structure as if such construction were
procured from a registered person.”
(7) The following Section 8A. Shall be inserted after Section 8:
“8A. Provision of bank guarantee: (1) An industry that
exports more than Sixty percent of the total sale of the last
Twelve months after the operation of the industry may
make import by furnishing a bank guarantee with the
concerned Tax Office in consideration for tax while
importing the raw materials required to produce the goods
in the quantity of export, and import of goods to be
imported for a duty free shop through a bonded warehouse
may be made by furnishing a bank guarantee with the
concerned Tax Office in consideration for tax leviable on
such goods.
Provided that, except for the import by a duty free
shop through a bonded warehouse, in order for the or
exporter to avail such a facility, the exporter has to make
finished goods from the raw materials, with Ten percent
value addition.
(2) Liquors and cigarettes imported through a
bonded warehouse availing the facility as referred to in
Sub-section (1) have to be sold only to the diplomatic and
tariff facility enjoying persons or bodies that are
recommended by the Government of Nepal, Ministry of
Foreign Affairs.
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(3) Liquors and cigarettes in stock at the duty free
shop situated at the Tribhuvan International Airport at the
time of commencement of this Act may be transferred to
its own bonded warehouse that has been licensed or be
sold upon paying leviable tax.
(4) The bank guarantee furnished pursuant to Sub-
section (1) shall be released from the concerned Tax
Office in accordance with the procedures specified by the
Department.
(5) A person who enjoys the facility as referred to
in this Section shall not be entitled to the facility as
referred to in Sub-section (4) of Section 24.”
(8) The following Section 9 shall be substituted for Section 9:
“9. Exemption for small vendor: Notwithstanding anything
contained in the other provisions of this Act, an exemption
may be provided to a small vendor, having a prescribed
annual taxable transaction threshold, from the
requirements of registration and filing of tax returns and
from such requirements as may be prescribed.
Provided that, if a small vendor wishes to have
his/her transaction registered voluntarily, he/she may have
such registration after completing the procedures as
referred to in Section 10.”
(9) Of Section 10,-
(a) The following Sub-sections (1) and (2) shall be
substituted for Sub-sections (1) and (2):
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“(1) A person who intends to be engaged in any
transactions has to make an application, in the prescribed
format, to the Tax Officer, for registration, prior to
commencing the transactions.
(2) If any goods transacted by a person is taxable or
if any person operates hardware, sanitary, furniture,
fixture, furnishing, automobiles, motor parts, electronics,
marble and color lab transactions within a Municipal
Corporation, Sub-municipal Corporation, Municipality or
Depart or within an area specified by the Department, the
person has to make an application in the prescribed
format, to the Tax Officer, for registration, within Thirty
days after the date of imposition of such tax or the date of
commencement of the transactions.”
(b) The word “application” shall be substituted forthe word
“petition” contained in Sub-section (4).
(10) The following Section 10A. Shall be inserted after Section 10:
“10A. Special provision relating to provisional registration:
(1) In the case of an exhibition, fair and similar other
transaction to be organized temporarily, the organizer and
any entrepreneur who carries on the transaction of any
taxable goods or services in such an exhibition or fair and
is not registered with the Value Added Tax shall have to
be registered with the Value Added Tax temporarily. In
the case of a person who is so registered, the Tax Officer
may require a deposit in consideration for security.
(2) An entrepreneur who has been registered with
the Value Added Tax since previously pursuant to Sub-
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section (1) may take back through stock transfer th goods
exhibited in that program.
(3) A tax payer who has been registered only for
the program as referred to in Sub-section (1) shall have to
cancel the temporary registration by furnishing the details
of transaction and paying all the leviable tax within Seven
days after the completion of the organized exhibition or
fair.”
(11) Of Section 11,-
(a) Of Sub-section (1),-
(1) The following Clause (c) shall be substituted for
Clause (c):
“(c) In the case of a partnership firm, if such
partnership firm is dissolved or the partner
dies,”
(2) The following Clause (d1) shall be inserted after
Clause (d):
“(d1) If the taxpayer is one who gives zero return
or does not give return at all within a
consecutive period of One year,”
(3) The following Clause (1b) shall be inserted after
Clause (1a):
“(1b) A taxpayer has to submit his or her
documents for auditing within fifteen days of the
submission of the tax returns for cancellation of
registration, and the Tax Officer shall perform the
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audit of such a taxpayer, cancel the registration
within Three months or if registration is not to be
so cancelled, the Tax Officer shall give information
thereof to the taxpayer. If the Tax Officer does not
cancel registration or make decision to cancel
registration within that period, the taxpayer is not
obliged to furnish the tax returns subsequent to that
period.”
(b) The following Sub-section (3) shall be substituted for
Sub-section (3):
“(3) Out of the goods that have already enjoyed the
tax deduction facility, the stock (capital goods as well)
remain available for use at the time of the cancellation of
registration shall be deemed supplied at the market price
and tax shall be assessed and recovered accordingly.
Explanation: For the purposes of this Sub-section,
“capital goods” shall mean any property or any part of
property and property that is used in taxable transactions.”
(c) The following Sub-section (4) shall be substituted for
Sub-section (3):
“(4) If any act and liability as required to be
performed and borne pursuant to this Act shall be du by
the reason of commission or omission of any act at he
time of carrying on taxable transaction, the cancellation of
registration of such a taxpayer shall not in self rsult in the
exemption of such a taxpayer from the consequence of
such a liability.”
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(12) The following Clause (b) shall be substituted for Clause
(b) of Sub-section (2) of Section 12:
“(b) Excise duty, ownership fee and other taxes save the
tax imposed under this Act.”
Explanation: For the purposes of this Clause,
"other tax amounts" means such tariffs, fees and
charges as are specified and levied by the yearly
Financial Act.
(13) The following Section 12A. shall be inserted after Section
12:
“12A. Taxable value of timber transaction: (1) There
shall be levied and collected tax on the amount of
royalty of the timber of national forest or the
amount of auction, whichever is higher, at the time
of auction, release or saw order, whichever is
earlier.
(2) If the timber of a personal cultivated,
private forest or community forest for business
purpose and despite that royalty is not chargeable,
tax shall be leviable as if it were the timber of
national forest.”
(14) Of Section 14,-
(a) The following proviso shall be inserted in Sub-
section (1):
“Provided that, a person who carries on
annual transaction of more than One Million
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Rupees shall issue invoices with serial number and
permanent accounts number as well as his or her
name, and address despite that he or she is not
registered.”
(b) The following Sub-sections (4), (5), (6) and (7)
shall be inserted after Sub-section (3):
“(4) One who transports goods attracting tax
of more than Ten Thousand Rupees outside the
area specified by the Department shall hold tax
invoices with him or her.
(5) The Department may order taxpayers to
issue invoices by using a cash machine or computer.
Other procedures on so issuing invoices by using a
cash machine or computer shall be as prescribed by
the Department.
(6) The Department may, by publishing a
notice or giving an order in writing, so specify tha
any person specified by such a notice or order has
to make public the retail sale value or price of any
such goods as specified in that order or notice for
such period as specified therein. No sale or transfer
of any goods shall be made without making public
the retail sale price after the receipt of such a notice
or order.
(7) Provision shall be made that any person
specified pursuant to Sub-section (6) shall, in
selling such goods to any unregistered persons,
have to issue invoices of the price made public in
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the specified format and collect also the tax at the
consumer level.
Provided that, any persons not so specified
pursuant to Sub-section (6) may issue invoices as
referred to in this Sub-section.”
(15) The following Sub-section (3) shall be inserted after Sub-section
(2) of Section 15:
“(3) Notwithstanding anything contained in Sub-sections
(1) and (2), a Local Body or an international organiz tion or
mission situated in Nepal or the Government of Nepal has to
collect or recover tax for sale goods or services.
(16) Of Section 16:
(a) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) The Department may have continuous access
to the computer database of taxpayers.”
(b) The following Sub-section (3a) shall be inserted after Sub-
section (3):
“(3a) A person who carries on the transactions of
taxable goods or services but is not registered has him elf
or herself certify the account of purchase and sale for ach
financial year. The Tax Officer may at any time examine
such an account.”
(17) The following Section 16A. Shall be substituted for Section 16A:
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“16A. Records processed by computer to be eligible as
evidence: (1) Notwithstanding contained in the laws in
force, the records relating to taxpayer processed by the
computer installed in the Department or offices thereunder
shall be eligible as evidence for purposes of tax, except as
otherwise proved.
(2) The Department may by publishing a notice,
make necessary arrangements on the issuance of invoices,
maintenance of accounts, submission of tax returns and
payment through electronic medium."
(18) The following Section 16B. Shall be inserted after Section 16A:
“16B. Deduction of tax paid on goods in the event of loss: In
the event of loss and damage due to arson, theft, accident,
wear and tear or disruptive activity, deduction of value
added tax paid on the goods shall be allowed as
prescribed.”
(19) Of Section 17,-
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) Notwithstanding anything contained in Sub-
section (1), it may be provided that no deduction or only a
partial deduction may be granted in the case of the
prescribed goods that can be used for personal purpose or
for business purpose or for both purposes.”
(b) The following Sub-section (5a) shall be substituted for
Sub-section (5a):
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“(5a) The concerned taxpayer shall be allowed to
deduct tax paid on the capital goods that were imported or
purchased by entering into a loan agreement under
financial lease subject to Sub-section (2).”
(c) The following Sub-section (5b) shall be inserted after
Sub-section (5a):
“(5b) The concerned taxpayer shall be allowed to
deduct tax paid pursuant to Sub-section (2) of Section 8,
Section 12A. and Sub-section (3) of Section 15.”
(d) The following Sub-section (8) shall be inserted after Sub-
section (7):
“(8) Notwithstanding anything contained
elsewhere in this Section, the name of a taxpayer who
does not submit the tax returns for Six months
consecutively shall be made public, and if there is any
amount due for tax deduction by such a taxpayer, such
amount may be suspended and his or her registration may
also be suspended.”
(20) Of Section 18,-
(a) The words “or by registered post” shall be inserted after
the words “before the Tax Officer” contained in Sub-
section (1).
(b) The following Sub-sections (1a) and (1b) shall be inserted
after Sub-section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), a taxpayer in a district where there is no
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Inland Revenue Office may furnish the amount of tax and
tax returns to be paid and submitted by him or her with
the Office of Funds and Accounts Controller of the same
district within the Fifteenth day of the month in which he
or she has to furnish the tax returns. The Office of Funds
and Accounts Controller shall forward the returns of tax
and payment of tax so received to the Inland Revenue
Office within Seven days.
(1b) the procedures for furnishing and forwarding
the returns pursuant to Sub-section (1) may be determin d
by the Department.”
(21) Of Section 19,-
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a taxpayer does not pay the tax within the
time limit specified in Sub-section (1), an extra charge of
Ten percent per annum shall be imposed on the amount of
tax due and outstanding.”
(b) Sub-section (3) is, hereby, deleted.
(c) The words “pursuant to Sub-section (2)” shall be
substituted for the words “pursuant to Sub-section (2) or
(3)” contained in Sub-section (4).
(d) The words “Sub-section (2)” shall be substituted for the
words “pursuant to Sub-section (2) or (3)” contained in
Sub-section (5).
(22) Of Section 20,-
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(a) The following Clauses (f), (g), (h) and (i) shall be inserted
after Clause (e) of Sub-section (1):
“(f) If supply is made to the group company by making
under invoicing,
(g) If transaction is carried out by a person required to
be registered without being so registered,
(h) If sale is made without issuing invoices,
(i) If tax is collected by an unregistered person.”
(b) The following Sub-section (4) shall be substituted for
Sub-section (4):
“(4) In assessing the tax pursuant to Sub-section
(1), tax assessment shall have to be made within Four
years from the date of submission of the tax returns. If the
tax assessment cannot be made within that period, the
returns so filed shall ipso facto be considered to be valid.”
(c) The following Sub-section (4a) shall be inserted after Sub-
section (4):
“(4a) Notwithstanding anything contained in Sub-
section (4), where any person has evaded tax by preparing
false accounts or invoices or other documents or by f aud,
the Department may at any time issue an order for the
reassessment of tax.”
(23) Of Section 21,-
(a) The following Clause (c) shall be substituted for Clause
(c) of Sub-section (1):
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“(c) By selling all or some of the properties of the
taxpayer through sealed quotations or auction at
the same time or various times.”
(b) Sub-section (2) shall be deleted.
(24) The following Section 22A. Shall be inserted after Section 22:
“22A. Provision against tax evasion plan: Notwithstanding
anything contained elsewhere in this Act, if any taxpayer
commits any of the following acts with mala fide inte tion
to take advantage of tax, the taxpayer shall be deemed to
have committed enticement to evade tax through tax
exemption scheme, and the Director General may order
the Tax Officer to assess the tax of such a taxpayer nd
recover the same:
(a) To lessen the liability of tax by making or doing
any scheme or act with mala fide intention to evade
tax by manipulating any provision contained in this
Act,
(b) If any person or entity does any act with mala fide
intention to lessen the liability of tax or enters into
agreement with that intention.”
(25) The following Sections 23C. and 23D. Shall be inserted after
Section 23B.
“23C. Purchase of goods of under invoicing: (1) If any person
sells any goods by under invoicing, showing the selling
price lesser than the prevailing market price, the Tax
Officer shall, notwithstanding anything contained in the
laws in force, withhold the goods in stock similar to those
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goods so under invoiced and sold and the Inland Revenue
Office may purchase or cause to be purchased the sam at
the price under invoiced and sold.
(2) If, in purchasing or caused to be purchased the
goods by the Department or Office pursuant to Sub-
section (1), such a person does not agree to sell the goods,
the Department of office shall take such goods in its
custody, make calculation on the basis of the price at
which they were under invoiced and sold and make
payment when such a person shows up to receive
payment.
(3) The goods purchased or caused to be purchased
pursuant to Sub-sections (1) and (2) may be sold or
caused to be sold at such price and in accordance with
such procedures as may be specified by the Director
General.”
“23D. Power to make search, seizure or demand deposit or
security: (1) If the Tax Officer finds that any person, firm,
company or organization has done transaction by evading
tax and there is a possibility that the accused may go away
or the evidence and proof of offence may disappear, the
Tax Office may, with the approval of the Director General,
do or cause to be done any of the following acts:
(a) To seal the place of transaction,
(b) To take custody of the electronic equipment
or records thereof,
(c) To demand cash deposit or wealth guarantee
in a sum equivalent to the tax evaded from
the person believed to have committed the
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offence, by executing a memorandum to that
effect,
(d) To withhold the bank account in the name
of taxpayer for up to Three months.
(2) The Tax Officer shall have the same powers
as the police may exercise under the laws in force in
relation to the investigation of offences pursuant to this
Act.”
(26) The following Sub-section (4) shall be substituted for Sub-
section (4) of Section 24:
“(4) Notwithstanding anything contained in Sub-sections
(2) and (3), any registered person whose export sales for One
month are 40 percent or more of his or her total sales for that
month, and submits an application following the procedures set
forth in this Section for the refund of the amount that is
deductible pursuant to Section 17 shall be entitled to a refund of
the remaining excess in lump sum after adjusting any outstanding
amount.”
(27) The following Sub-section (5) shall be substituted for Sub-
section (5) of Section 24:
“(5) On the submission of an application pursuant to Sub-
section (3) or (4), the Tax Officer shall refund the amount held to
be refundable immediately and if such an amount is ot refunded
within Thirty days after the date of submission of application in
relation to the matter referred to in Sub-section (3) and within
Sixty days in relation to the matter referred to in Sub-section (4),
the Government of Nepal shall have to provide interest on that
amount, as prescribed.”
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(28) The following Section 24A. Shall be inserted after Section 24:
“24A. Tax not to be refunded: (4) Notwithstanding anything
contained in Section 24, if an application is not made for
the refund of the amount refundable pursuant to this Act
within Three years after the date of expiration of the
period of tax, such refund shall not be made.”
(29) Of Section 25,-
(a) The following Clause (a) shall be substituted for Clause
(a) of Sub-section (1):
“(a) If a foreign county grants on reciprocity that t x
exemption facility to Nepalese diplomats whom the
Government of Nepal, Ministry of Foreign Affairs,
has granted diplomatic recognition or to persons
enjoying diplomatic facility and serving in regional
or international missions or institutions, the amount
of tax paid by the Nepal based diplomats of such
country or regional or international missions or
institutions to the extent of consumption by them.”
(b) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), the tax paid by a diplomatic body or diplomat
on the purchase of taxable goods or services shall not be
refunded if the amount purchase is less than One
Thousand Five Hundred Rupees at one time.”
(30) The following Sections 25A. Shall be inserted after Section 25:
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“25A. Refund of tax paid by foreign tourist on purchase: If a
foreign tourist visiting Nepal and returning by air
purchases taxable goods of more than Fifteen Thousand
Rupees and takes them with him or her, the tax paidon
such goods shall be refunded in accordance with the
procedures specified by the Department.
(31) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of interest
shall be Fifteen per cent per annum.”
(32) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 28:
“(1a) If any goods manufactured or prepared within
Nepal, after the completion of export procedures by the Customs
Office or after reaching a foreign country, are re-imported
because of rejection by the concerned party or other reason, and
the same goods are to be exported within Three months of the
import, the goods may be released against the deposit of the value
added tax leviable at the time of such return, and the deposit
shall be refunded after the re-export of such goods. The
concerned Customs Office shall provide the details of amount so
furnished as a deposit and refunded to the Inland Revenue
Office.”
(33) Of Section 29,-
(a) Of Sub-section (1),-
(1) The following Clause (a) shall be substituted for
Clause (a):
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“(a) In the event of violation of Sub-section (1)
or (2) of Section 10, Ten Thousand Rupees
for every tax period.”
(2) The following Clause (b1) shall be inserted after
Clause (b):
“(b1) In the event of failure to place a tax board in
accordance with this Act or the Rules
framed under this Act, a fine of Two
Thousand Rupees for each week and in the
event of failure to place it at the designate
place, a fine of One Thousand Rupees.”
(3) The following Clause (c) shall be substituted for
Clause (c):
“(c) In the event of violation of Sub-sections (1)
and (4) of Section 14, Five Thousand
Rupees for each instance.”
(4) The following Clause (d) shall be substituted for
Clause (d):
“(d) In the event of violation of Section 15, cent
percent amount of tax collected.”
(5) The following Clause (g1) shall be inserted after
Clause (g):
“(g1) In the event of violation of Sub-section (3a)
of Section 16, One Thousand Rupees for
each instance.”
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(b) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) In the event of lessening tax liability without
observing this Act or the Rules framed under this
Act, the Tax Officer may fine up to Twenty Five
percent of the amount of tax, on the grounds as
specified by the Department.”
(2) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a person commits any of the following
offences, the Tax Officer may impose a fine of cent percent
of the amount of tax or an imprisonment up to Six months
or both the fine and the imprisonment on such a person:
(a) Preparing false accounts, invoices or other
documents;
(b) Committing an evasion of tax by fraud;
(c) If an unregistered person acts as if he or she
were a registered person;
(d) Infringing Section 23C.;
(e) Carrying out a transaction by infringing
Section 30.”
(34) The following Section 29A. shall be inserted after Section 29:
“29A. Power of Department to order to furnish the amount
of fine: (1) Notwithstanding anything contained elsewhere
in this Act, if any person, prior to the commencement of
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proceedings of action, admits in writing that he or she has
committed another offence or more than such offence set
forth in Sub-section (2) of Section 29, the Department my
order such a person to furnish the amount of fine not
exceeding the amount of fine imposable for the
commission of such an offence.
(2) In issuing order as referred to in Sub-section
(1), such an order has to set out the details of such
offence, amount of fine to be paid and date for payment of
the amount of fine.
(3) An order issued by the Department pursuant to
this Section shall be final.”
(35) The following Section 30A. shall be inserted after Section 30:
“30A. Power to order for reassessment of tax: (1) In cases
where, before tax is assessed, it appears from the
information given to the Director General that any action
relating to the assessment of tax is about to be irregular or
has been irregular, the Director General may, by executing
a memorandum clearly setting out the reasons, give
direction to the concerned Tax Officer to make
reassessment of tax or order any other Tax Officer to do
that act.
(2) In cases where it appears that tax liability has
increased because of tax assessment made by the Tax
Officer recklessly or with mala fide intention, the Director
General may give order to amend such tax assessment
order within Four months after the date of initial t x
assessment.”
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(36) The following Section 31A. shall be substituted for Section 31A:
“31A. Application may be made for administrative review:
(1) A person who is not satisfied with any decision of tax
assessment made by the Tax Officer may make an
application to the Department against the decision within
Thirty days of the date of receipt of a notice of that
decision.
(2) In cases where the time limit for making
application pursuant to Sub-section (1) expires andy
person makes an application for the extension of time l mit
within Seven days from the date of expiration of the ime
limit, the Department may extend the time limit for a
period not exceeding Thirty days from the date of
expiration of the time limit.
(3) If the claim of the applicant appears to be true
upon examining the evidence and documents including the
application made by the taxpayer pursuant to Sub-section
(1), the Director General may, by executing a
memorandum setting out the clear reasons, void that tax
assessment order and direct the concerned Tax Officer to
make re-assessment of tax or order any Tax Officer to do
that act.
(4) The Department shall make decision on the
application within Sixty days after the date of making of
application pursuant to Sub-section (1).
(5) If the Department does not give decision within
the time limit as referred to in Sub-section (4), the
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concerned person may make an appeal to the Revenue
Tribunal pursuant to Section 32.
(6) The taxpayer who makes an application
pursuant to Sub-section (1) has to pay undisputed amount
of tax, out of the amount of tax assessed, and furnish a
cash deposit of One Third of the amount of tax in
controversy.
(7) In cases where excess of the amount to be
furnished pursuant to Sub-section (1) has been furnished
prior to the making of application, only the remaining
amount upon deduction of the amount covered by that
amount may be furnished as deposit.
(37) The following Section 32 shall be substituted for Section 32:
“32. Appeal in the Revenue Tribunal: (1) A person who is
not satisfied with an order of suspension made by the
Director General pursuant to Section 30 or a decision
made by the Department pursuant to Sub-section (4) of
Section 31A. may file an appeal in the Revenue Tribunal
accordance to Revenue Tribunal Act, 2031.
(2) The person who files an appeal pursuant to
Sub-section (1) has to register a copy of the appeal with
the Department within Fifteen days of the date of filing
appeal.”
(38) The following Section 32A. shall be inserted after Section 32:
“32A. Advance ruling: (1) If any person makes an application in
writing to the Department for the removal of any
confusion as to the application of this Act, the Department
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may issue its version by an advance ruling as prescribed,
by notifying the person in writing.
(2) Notwithstanding anything contained in Sub-
section (1), the Department shall not be entitled to issue
an advance ruling referred to in Sub-section (1) on any
matter of confusion occurred in the implementation of this
Act in cases where such matter is sub judice in the court
or has already been decided by the court.
(39) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of
Nepal may obtain the service of the concerned expert for
the act related to tax auditing; and the provision
governmental secrecy mentioned in Section 37 shall also
apply to such an expert.”
(40) The following Sub-section (1) shall be substituted for Sub-
section (91) of Section 40:
“(1) A person who provides information, along with
evidence, showing that a taxpayer has evaded or attemp ed to
evade all or some portions of his or her tax liabilty may be
awarded, by a decision of the Director General, as reward the
amount that is equal to Twenty per cent of the amount of tax
recovered on the basis of that information.”
(41) The following Schedule-1 and Schedule-2 shall be substituted
for Schedule-1 and Schedule-2:
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“ Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice (heading 10.06), wheat (heading 10.02), maize
(heading 10.05), barley (heading 10.03), millet (sub heading
10.08.20), buckwheat (sub heading 10.08.10), pulses (h ading
07.13), flour and rye flour (heading 11.01, 11.02), grains
(heading 11.04), paddy flakes (heading 19.04), peas, beans,
chickpeas and kidney peas (heading 07.08 and 07.13) and similar
basic unprocessed food materials and their extracts.
(b) Green and fresh vegetable (from heading 07.01 to 07.11)(except
(sub heading 07.03.20), fresh fruits (from headings and sub
headings 08.01.19, 08.03, 08.04.30, 08.04.40, 08.04.50, 08.05,
08.06.10, 08.07 to 08.10), fresh eggs (sub heading 06.03.10),
tuberous roots, corms, fruits, and vegetables and fresh and
unprocessed agro-products, except those to be supplied to hotels,
restaurants, bars, guest houses, cafeteria and other similar
organizations).
(c) Unprocessed cash crops/cereals (such as sugarcane (sub heading
12.12.99), cotton (heading 52.01), cardamom (sub heading
09.08.30), ginger and saffron (sub heading 09.10.10), flax
(heading 53.01 and sub heading 53.03.10)), unprocessed
tobacco, tea leaf sold by farmers(sub heading 09.02.10 and
09.02.20), tea chest (sub heading 44.15.10), coffee (sub heading
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09.01.11 and 09.01.12), soybean (heading 12.01),ground-nuts
(heading 12.02), turmeric(curcuma) (sub heading 09.1 .30), oil-
cake and other solid residues (headings 23.04 and 23.05).
(d) Herbs (including their extracts).
Group 2. Goods of Basic Needs:
(a) Piped water, including water supplied by tankers.
(b) Fuel wood (sub heading 44.01.10).
(c) Coal (heading 44.02).
(d) Salt (sub heading 25.01.00.90).
Group 3. Live Animals and animal products
(a) Goats (sub heading 01.04.20), sheep and mountain goats (sub
heading 01.04.10), yak and buffalos (heading 01.02), bore and
pigs (heading 01.03), rabbit (sub heading 01.06.19) and their
unprocessed raw edible food items (from headings 02.01 to
02.04, heading 02.06).
(b) Cows and she buffalos (heading 01.02), she goats (Sub-heading
01.04.20), and their fresh milk (including pasteurized) (heading
04.01), curd (Sub-heading 04.06.100, bees (Sub-heading
01.06.90) and bee hives (Sub-heading 44.15.100).
(c) Ducks, hens, cocks, turkey and similar other birds 9heading
01.05) their fresh meat and unprocessed raw items (heading
02.07) and eggs (heading 04.07)
(d) Fresh or dried fish (other than packed) (heading 03.01) (from sub
heading 03.02.33 to o3.02.36, except 03.02.700 (heading 03.03
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(except sub heading 03.03.80, sub headings 03.07.41 and
03.07.49).


4. Agricultural inputs
(a) Crops, grasses, flowers or live trees and other plants, bulbs,
tubers, tuberous roots and bulbs and roots used as seeds
(headings 06.01, 06.02, 06.04, and 12.09).
(b) Manure, fertilizer and soil conditioners (Chapter 31).
(c) Hand tools, spades, shovels, mattocks, picks, hoes, forks and
rakes, axes, bill hooks and similar hewing tools, secateurs of any
kind, scythes, sickles, hay knives, other than hand saws, hedge
shears, timber wedges, ploughshare and other tools of a kind used
in agriculture (heading 82.01).
(d) Insecticides, rodenticides, fungicides, herbicides and de-ratting
drugs as mentioned in Chapter 38 of Customs Tariff used only for
crops (sub headings 38.08.91.90, 38.08.92, 38.08.93, 38.08.99)
(e) Tractors (heading 87.01), cultivators (sub heading 84.32.29),
tantalum (sub heading 84.32.21), levelers (sub heading
84.32.80), harvesting or threshing machine (heading 84.33),
threshers (sub heading 84.33.52), fishing nets (sub heading
56.08.11), ready-made cages for aquaculture, fish incubators,
pumping sets with engines from Two to Eight horse power and up
to 30 meters hose pipe accompanied with the sets, used in
irrigation works.
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(f) Raw materials of deed supplements falling under Chapters 23, 28
and 29 of the Customs Tariff, animal feeds and feedsupplements
falling under Chapter 23 of the Customs Tariff, and lime stone
dust, bone dust and fish dust falling in Chapter 25.
(g) Special kind of utensils for feeding poultry feed except normal or
general utensils, and special kinds of utensils for feeding water to
poultry.
Group 5. Medicine, Medical and Similar Health services
(a) Health services (other than health services provided by the
institutions registered with the value added tax).
(b) Human blood and human blood items and vaccines, (heading
30.02).
(c) Human or animal organs or tissue for medical research (heading
30.01).
(d) Medicaments for treatment of livestock and human beings and
family planning means (headings 30.03, 30.04 (except
Chwanpras) sub heading 40.14.10).
(e) Pacemakers used in treatment of heart diseases (Sub-headings
90.21.50), Stent, valve of heart (Sub-headings 90.21.90), bath
concentrate solid or liquid used in dialysis (Sub-headings
38.24.90), goods made for, and suitable only for the use of,
infirm and disabled persons, (including scooters) (Sub-headings
87.13.10 and 87.14.20),
(f) X-ray film (sub heading 37.02.10) and oxygen gas to be used for
treatment (sub heading 28.04.40) and bandage (heading 30.05).
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(g) Raw materials for drug industries and production of Intra
Ocular Lance (I.O.L.) : metal salts, oxides and hydro-oxides
used by drug industries and in the production of IOL, falling
under Chapter 28 of the Customs Tariff, as well as raw materials
of drugs (active ingredients of drugs) and raw materi ls used by
drug industries in production of drugs or in IOL , and packing
materials.
Group 6: Education
(a) Research related acts in schools or universities,
(b) Vocational or professional trainings or refreshr trainings,
provided by institutions fully owned by the Government of
Nepal,
(c) Educational services provided by schools and universities.
Group 7: Books, newspapers and printed materials
(a) Books, calendars, newsletters (headings 49.01, 49.02, 49.04) and
printing and publication thereof.
(b) Newsprint (heading 48.01).
Group 8: Artistic and cultural goods and services, carving services
(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programs.
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
Group 9: Passengers and goods transportation services:
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Air transport, passenger transportation (except cabal car) and goods
carrier service (except transportation related to supply).
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Group 10: Personal or Professional service:
Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually, and
services of supplying human resources to foreign countries.
Group 11: Other goods or services:
1. Postal services (only those provided by the Governm nt of
Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets,
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packets,
(c) Postage stamps (heading 49.07),
(d) Services provided by the Government of Nepal.
2. Excise duty stamps and passports (heading 49.07), cash machines
(sub heading 84.70.90)
3. Financial services and life insurance services.
4. Bank notes, coins and cheque books:
(a) Printing and issue of bank notes,
(b) Supply of bank notes from foreign countries into Nepal
(heading 49.07).
(c) Cheque books

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5. Gold and silver:
(a) Gold (heading 71.08), gold coins (sub heading 71.18.90),
gold ornaments (heading 71.130 and diamond ornaments.
(b) Silver (heading 71.06), and silver coins (sub heading
71.18.90), silver ready-made goods and ornaments
(heading 71.13)
6. Electricity supply,
7. Raw wool (heading 51.01).
8. Battery operated tempo (sub heading 87.03.21.10) and their
chassis (sub heading 87.06.00.15).
9. Bio-gas, solar power and wind power operated power generation
plants and their equipment and tubular battery, on the
recommendation of the Alternative Energy Promotion Centre.
10. Aircrafts and helicopters (heading 88.02 (except sub heading
88.02.60) and their engines (sub heading 84.09.10, gear box (sub
heading 88.05.10), fire brigades 9sub heading 87.05.30),
ambulances and corpse carrying vehicles (heading 87.02 and
87.03)
11. Jute batching oil (sub heading 27.10.19.13) andjute products
(headings 53.06, 53.07 and 53.10)
12. Mills, machineries and equipment, molding keys (except spare
parts) other than those that can be used in household attracting
up to 5 percent customs duty as falling under Part 84 of the
Customs Tariff.
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13. Woolen carpet and woolen carpet weaving, dying, washing and
knitting.
14. 100 percent cotton sari, Lungi, Dhoti (for both men and
women), Gamcha and cotton yarn (headings 52.05 and 52.07).
15. Woolen yarn to be used in hand knitting sweater (except artificial
and acrylic) domestically.
16. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
17. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
18. Amount equal to such tax as deemed payable that remains
balance upon deducting the tax paid on purchase from the tax
collected on the sale of goods by textile, match (only wooden
stick) and tyre-tube industries shall be refunded to these
industries in accordance with the procedures specified by the
Department.
19. Only Twenty Five percent of the amount equal to such tax as
deemed payable that remains balance upon deducting the tax
paid on purchase from the tax collected on the saleof own
products (flour) by flour industries shall be refunded to these
industries in accordance with the procedures specified by the
Department.
20. If any native industry that manufactures cellular mobile phone
sets and importer thereof submits evidence that they have sold
the tax paid on the raw materials of cellular mobile phone sets or
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readymade goods sixty percent shall be refunded in accordance
with the procedures specified by the Department.
21. The value added tax shall be exempted in relation to imports of
such machinery, equipment, tools and their spare pats, penstock
pipes or iron sheets used in making thereof as required for hydro
power projects and as are not produced in Nepal, on the
recommendation of the Alternative Energy Promotion Center, in
the case of those which are operated with the approval f that
Center, and on the recommendation of the Electricity
Development Department, in the case of the industries except
those which are operated with the approval of the Alt rnative
Energy Promotion Center.
22. The value added tax shall not be levied on transferring any motor
vehicles that were imported by any foreign mission or donor
agency with the enjoyment of the diplomatic facility or tariff
facility to the project itself in consonance with te approval
annual program of the project and converting their number plates
into governmental ones or on transferring, with theapproval of
the Ministry of Finance, any motor vehicles that were imported in
the name of any project with the enjoyment of full or partial tariff
facility (except those imported on inventory or bank guarantee)
to any governmental body after the completion of the project and
converting their number plates into governmental ones.
23. If any diplomatic body, project or other body (governmental as
well as non-governmental organization) intends to scrap and
cancel the registration of any motor vehicle that it has imported
with the enjoyment of the tariff facility and that is more than 15
years old after the year of initial production, with the approval of
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the Ministry of Finance, the value added tax shall not be levied
on such a motor vehicle.
24. If the owner of a motor vehicle imported by a citizen of Nepal for
personal use with the enjoyment of value added tax exemption
dies and the motor vehicle has to be transmitted to the husband
or wife of the owner of motor vehicle, the value adde tax shall
not be levied on such a motor vehicle on the basis of the approval
of the Department.
25. If any industries that have not enjoyed the facility of bonded
warehouse or passbook import the raw materials, subsidiary raw
materials, and packaging materials that are not produced in
Nepal, required for the production of goods to be exported by
them and export the goods produced from such raw materials in
accordance with such procedures and within such period as
prescribed, the value added tax levied on such raw materials,
subsidiary raw materials and packaging materials at the customs
points while importing them shall be refunded from the customs
point in relation to such goods, from such a date and on such pro
rata as specified in a notice published in the Nepal Gazette.
26. The following goods to be imported in the name of Nepal Army,
Armed Police Force and Nepal Police Headquarters shall enjoy
exemption, on the recommendation of the concerned Ministry:
(a) Ammunitions, arms, gunpowder and their spare parts,
special kind of oil, accessories, explosives to be us d by
Nepal Army, Armed Police Force and Nepal Police, raw
materials required to produce army materials and
machineries, tools and spare parts used for security.
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(b) Machineries and equipment required for maintaining peace
and security, crowd control materials, equipment and
other goods required for the investigation of crimes, and
communication materials to be used by personnel of Nepal
Army, Armed Police Force and Nepal Police, on the
recommendation of the Ministry of Communication.
(c) Such equipment, materials, drugs and related goods as
required for the treatment of Army personnel, armed
police and Nepal police personnel and of horses.
(d) Goods used in the exercise and training of Army, armed
police and Nepal police personnel.
(e) Heavy earth moving plant, tool and parts related thereto,
optical equipment used in engineering survey and
construction works carried out by Nepal Army, and such
defense store goods as specified by the Ministry of
Defense.
(f) Camping equipment used by Nepal Army and various
goods required for special force and paratroopers.
(g) Aircrafts, helicopters and their spare parts, parachute
(including bags), tools, lubricants and ground equipment
imported in the name of Nepal Army.
(h) Equipment and tools required for the operation f
hospitals.
(i) Goods required for scientific laboratories.
(j) Goods used in natural calamity relief works.
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(27) If the Government of Nepal considers reasonable to grant any exemption
to any taxable goods or to refund tax, it may grant such exemption by
publishing a notice in the Nepal Gazette.
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the services
provided by such entities carrying on business such as otels and guest
houses)
Group 13: Betting, casinos and lotteries
Activities relating to facilities provided for the organization of bets or
gambling, and lottery.
Note:
The value added tax shall be exempted only on the goods specifically
mentioned in the foregoing headings and sub headings. The Department
may, as required, and in consultation with the Department of Customs,
alter and revise the interpretation of the goods and services enjoying tax
emption and the Harmonized Code of Commodities.







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Schedule-2
(Relating to Sub-section (2) of Section 7
Goods and services subject to zero rate
1. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
2. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
3. Goods or services imported by a person or mission enjoying diplomatic
facility and a person serving in a diplomatic mission enjoying tariff
facility, on the recommendation of the Ministry of Foreign Affairs,
Government of Nepal.
4. If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
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shall be provided on such supplies, so long as suchtreaty or agreement
is in effect.
5. Raw materials to be sold to and goods manufactured by any industries
established pursuant to the laws in force and operated in the special
economic zone.
6. If, on the recommendation of the Alternative Energy Promotion Center,
the battery used in the equipment and mechanism generati g energy
from solar power is produced by any native industry and is to be
supplied by that industry, the facility of zero rate shall be provided to
that industry on that transaction on the recommendation of Alternative
Energy Promotion Center and in accordance with the procedures
specified by the Department.
7. If any machinery, equipment, tools and their spare parts, penstock pipes
or iron sheets used in making thereof required for hydro power projects
are produced by any native industry and are to be supplied by that
industry, the facility of zero rate shall be provided to that industry on
that transaction, on the recommendation of the Alternative Energy
Promotion Center, in the case of a project that is operated with the
approval of that Center, and on the recommendation of the Electricity
Development Department, in the case of one other than at operated
with the approval of the Alternative Energy Promotion Center and in
accordance with the procedures specified by the Department.
8. If painting, handicrafts, carving and similar other handicrafts produced a
cottage and small scale industry within Nepal are exported through an
approved export trading house of Nepal, the value added tax paid on the
raw materials used in the manufacture of such goods shall be refunded
after fulfilling the procedures specified by the Inla d Revenue
Department.
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9. The value added tax paid on the import or local purchase of scooters
used by persons with disabilities shall, if such scooters are registered in
their name in the Office of Transport Management, be refunded on the
recommendation of the Women, Children and Social Wefare or the
Chief District Officer of the concerned district, and in accordance with
the procedures as specified by the Department of Inland Revenue. If
such goods are sold to any persons other than the persons with
disabilities, the refunded value added tax shall be recovered.
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Financial Act, 2067 (2011)
Date of Authentication and Publication
2067.11. 03 (15 Feb. 2011)
An Act Made to Implement Proposals Relating to Finance of the
Government of Nepal
Preamble: Whereas, it is expedient to levy some charges, taxes, duties, cesses
and fees, continue or alter the existing ones and also to amend the laws in force
relating to revenue administration in order to implement the proposals relating
to finance of the Government of Nepal;
Now, therefore, be it enacted by the Constitution Assembly pursuant to
Sub-articles (1) of Article 83 of Interim Constitution of Nepal,2063 (2007).
1. Short title and commencement: (1) This Act may be called the
“Financial Act, 2067 (2010)."
(2) This Act shall come into force immediately.
30. Amendment to the Value-added Tax Act, 2052 (1996): Of the
Value-added Tax Act, 2052 (1996),-
(1) Of Section 2,-
(a) The following Clause (f1) shall be inserted after Clause
(f):
“(f1) “Group of companies or entities” means a group of
companies or entities in relation to which the
following situation exists:
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(a) If any business is carried on by a person or
agent member associated with the group of
entities,
(b) If any goods or services are supplied by the
group of entities to any entity or group of
other entities associated with it,
(c) If any goods or services are supplied to the
group of entity or member of the group,
(d) If the permanent address of operation of
business of any two or more than two
entitles is in the same place, or
(e) If the group of entities is controlled directly
or indirectly by any one person or some
persons.”
(b) The following Clause (h) shall be substituted for Clause (h):
“(h) "Consideration" means anything to be obtained in
exchange for the price of any goods or services being
supplied.”
(c) The following Clause (h1) shall be inserted after Clause (h):
“(h1) "Loan agreement" means a hire purchase agreement or
financial lease.”
(d) The following Clause (k1) shall be substituted for Clause (k):
“(k1) Electronic medium" includes approved means such as the
computer, internet, e-mail, fax, electronic cash
register/machine and fiscal printer.
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(e) The following Clause (t) shall be substituted for Clause (t):
“(t) “Tax Officer" means the Tax Officer, Chief Tax Officer and
the Chief Tax Administrator appointed by the Governme t
of Nepal for the purpose of this Act, and this term also
includes a section officer, director and deputy director at
the Department or such other officer designated by the
Government of Nepal authorizing to exercise the powers
of Tax Officer under this Act.”
(2) The following Section 4 shall be substituted for Section 4:
“4. Jurisdiction of the Tax Officer: (1) The jurisdiction of
Tax Officer shall be as prescribed by the Government of
Nepal.
(2) The Director General may also designate a Tax
Officer to inspect and monitor the transaction of taxpayers
in other areas than those falling under his or her
jurisdiction.”
(3) The following Section 5A. shall be substituted for Section 5A:
“5A. Tax not to be levied on transfer of ownership of
transactions: Notwithstanding anything contained
elsewhere in this Act, in cases where a registered person
sells the transaction being carried out by him or her to any
other registered person or the transaction is transferred in
the name of his or her heir by virtue of his or herd ath,
such transfer of ownership shall not be subject to tax. The
person registered in so selling or transferring the
transaction shall give information thereof to the
Department as prescribed.
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(2) Notwithstanding anything contained in Sub-
section (1), if any industry or business that is required to
be registered or has been registered pursuant to laws is
transferred, the transferee who obtains the ownership shall
bear the transferor’s liability of tax specified bylaw.
(3) The person who obtains ownership shall,
subject to Sub-section (3), bear the obligation of safely
maintaining the accounts, records and books of account f
the transaction of such an industry or business until the
prescribed period (before and after transfer) pursuant to
this Act.”
(4) The following Explanation shall be inserted in Clause (c) of Sub-
section (2) of Section 6:
“Explanation: For the purposes of this Clause, acquisition shall
be deemed in the following circumstance:
(f) Copyrights, patents, licenses, trademarks and
similar other rights,
(g) Advertisement services,
(h) Technical services, engineering services, services of
suppliers providing technical services, legal
services, accounting services, data and data
processing services, information services and similar
other services.
(i) In supplying the services as referred to in Sub-
section (1) or accepting any liability or undertaking
or in exercising that undertaking fully or partly or
doing any business activities in exercise of such
right, or
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(j) Insurance or reinsurance services other than the
facility of safe deposit.
(5) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 7:
“(1) The rate of tax to be levied pursuant to this Act shall be in
single rate of 13 percent.”
(6) Of Section 8:
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) A person, whether registered or not, who is the
recipient of services from a person who is not regist red
and is outside of Nepal shall have to assess and collect tax
at the taxable value in accordance with this Act and the
Rules framed under this Act.”
(b) The following Sub-section (3) shall be inserted after Sub-
section (2):
“(3) Even though the construction of a building
or apartment or shopping complex and similar other
structure as specified by the Department, of which value is
more than Five Million Rupees, and which is built for
business purpose is procured from a person who is not
registered, tax shall be assessed and collected from a
person who has ownership in that structure as if such
construction were procured from a registered person.”
(7) The following Section 8A. shall be inserted after Section
8:
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“8A. Provision of bank guarantee: (1) An industry that
exports more than Sixty percent of the total sale of
the last Twelve months after the operation of the
industry may make import by furnishing a bank
guarantee with the concerned Tax Office in
consideration for tax while importing the raw
materials required to produce the goods in the
quantity of export, and import of goods to be
imported for a duty free shop through a bonded
warehouse may be made by furnishing a bank
guarantee with the concerned Tax Office in
consideration for tax leviable on such goods.
Provided that, except for the import by a
duty free shop through a bonded warehouse, in
order for the other exporter to avail such a facility,
the exporter has to make finished goods from the
raw materials, with Ten percent value addition.
(2) Liquors and cigarettes imported through
a bonded warehouse availing the facility as referred
to in Sub-section (1) have to be sold only to the
diplomatic and tariff facility enjoying persons or
bodies that are recommended by the Government of
Nepal, Ministry of Foreign Affairs.
(3) Liquors and cigarettes in stock at the
duty free shop situated at the Tribhuvan
International Airport at the time of commencement
of this Act may be transferred to its own bonded
warehouse that has been licensed or be sold upon
paying leviable tax.
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(4) The bank guarantee furnished pursuant
to Sub-section (1) shall be released from the
concerned Tax Office in accordance with the
procedures specified by the Department.
(5) A person who enjoys the facility as
referred to in this Section shall not be entitled to
the facility as referred to in Sub-section (4) of
Section 24.”
(8) The following Section 9 shall be substituted for Section 9:
“9. Exemption for small vendor: Notwithstanding anything
contained in the other provisions of this Act, an exemption
may be provided to a small vendor, having a prescribed
annual taxable transaction threshold, from the
requirements of registration and filing of tax returns and
from such requirements as may be prescribed.
Provided that, if a small vendor intends to have his
or her transaction registered voluntarily, he or she may
have such registration after completing the procedur s as
referred to in Section 10.”
(9) Of Section 10,-
(a) The following Sub-sections (1) and (2) shall be
substituted for Sub-sections (1) and (2):
“(1) A person who intends to be engaged in any
transactions has to make an application, in the prescribed
format, to the Tax Officer, for registration, prior to
commencing the transactions.
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(2) If any goods transacted by a person is taxable or
if any person operates hardware, sanitary, furniture,
fixture, furnishing, automobiles, motor parts, electronics,
marble, educational consultancy, discotheque, healt
club, catering service, party place business, parking
service, dry cleaners using machinery equipment,
restaurant with bar, and colour lab transactions within a
Municipal Corporation, Sub-municipal Corporation,
Municipality or within an area specified by the
Department, the person has to make an application in the
prescribed format, to the Tax Officer, for registration,
within Thirty days after the date of imposition of such tax
or the date of commencement of the transactions.”
(b) The word “application” shall be substituted forthe word
“petition” contained in Sub-section (4).
(10) The following Section 10A. shall be inserted after Section 10:
“10A. Special provision relating to provisional registration:
(1) In the case of an exhibition, fair and similar other
transaction to be organized temporarily, the organizer and
any entrepreneur who carries on the transaction of any
taxable goods or services in such an exhibition or fair and
is not registered with the Value Added Tax shall have to
be registered with the Value Added Tax temporarily. In
the case of a person who is so registered, the Tax Officer
may require a deposit in consideration for security.
(2) An entrepreneur who has been registered with
the Value Added Tax since previously pursuant to Sub-
section (1) may take back through stock transfer th goods
exhibited in that program.
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(3) A tax payer who has been registered only for
the programme as referred to in Sub-section (1) shall have
to cancel the temporary registration by furnishing the
details of transaction and paying all the leviable tax within
Seven days after the completion of the organized
exhibition or fair.”
(11) Of Section 11,-
(a) Of Sub-section (1),-
(1) The following Clause (c) shall be substituted for
Clause (c):
“(c) In the case of a partnership firm, if such
partnership firm is dissolved or the partner
dies,”
(2) The following Clause (d1) shall be inserted after
Clause (d):
“(d1) If the taxpayer is one who gives zero return
or does not give return at all within a
consecutive period of One year,”
(3) The following Clause (1b) shall be inserted after
Clause (1a):
“(1b) A taxpayer has to submit his or her
documents for auditing within fifteen days of the
submission of the tax returns for cancellation of
registration, and the Tax Officer shall perform the
audit of such a taxpayer, cancel the registration
within Three months or if registration is not to be
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so cancelled, the Tax Officer shall give information
thereof to the taxpayer. If the Tax Officer does not
cancel registration or make decision to cancel
registration within that period, the taxpayer is not
obliged to furnish the tax returns subsequent to that
period.”
(b) The following Sub-section (3) shall be substituted
for Sub-section (3):
“(3) Out of the goods that have already
enjoyed the tax deduction facility, the stock (capit l
goods as well) remain available for use at the time
of the cancellation of registration shall be deemed
supplied at the market price and tax shall be
assessed and recovered accordingly.
Explanation: For the purposes of this Sub-section,
“capital goods” shall mean any property or any part
of property and property that is used in taxable
transactions.”
(c) The following Sub-section (4) shall be inserted
after Sub-section (3):
“(4) If any act and liability as required to
be performed and borne pursuant to this Act shall
be due by the reason of commission or omission of
any act at the time of carrying on taxable
transaction, the cancellation of registration of such
a taxpayer shall not in self result in the exemption
of such a taxpayer from the consequence of such a
liability.”
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(12) The following Clause (b) shall be substituted for Clause (b) of
Sub-section (2) of Section 12:
“(b) Excise duty, ownership fee and other taxes save the tax
imposed under this Act.”
Explanation: For the purposes of this Clause, "other tax
amounts" means such tariffs, fees and charges as are
specified and levied by the yearly Financial Act.
(13) The following Section 12A. shall be inserted after Section 12:
“12A. Taxable value of timber transaction: (1) There shall be
levied and collected tax on the amount of royalty of the
timber of national forest or the amount of auction,
whichever is higher, at the time of auction, release or saw
order, whichever is earlier.
(2) If the timber of a personal cultivated, private
forest or community forest for business purpose and
despite that royalty is not chargeable, tax shall be eviable
as if it were the timber of national forest.”
(14) Of Section 14,-
(a) The following proviso shall be inserted in Sub-section (1):
“Provided that, a person who carries on annual
transaction of more than One Million Rupees shall issue
invoices with serial number and permanent accounts
number as well as his or her name, and address despite
that he or she is not registered.”
(b) The following Sub-sections (4), (5), (6) and (7) shall be
inserted after Sub-section (3):
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“(4) One who transports goods attracting tax of
more than Ten Thousand Rupees outside the area
specified by the Department shall hold tax invoices with
him or her.
(5) The Department may order taxpayers to issue
invoices by using a cash machine or computer. Other
procedures on so issuing invoices by using a cash machine
or computer shall be as prescribed by the Department.
(6) The Department may, by publishing a notice or
issuing an order in writing, so specify that any person
specified by such a notice or order has to make public the
retail sale value or price of any such goods as specified in
that order or notice for such period as specified therein.
No sale or transfer of any goods shall be made without
making public the retail sale price after the receipt of such
a notice or order.
(7) Provision shall be made that any person
specified pursuant to Sub-section (6) shall, in selling such
goods to any unregistered persons, have to issue invoices
of the price made public in the specified format and
collect also the tax at the consumer level.
Provided that, any persons not so specified
pursuant to Sub-section (6) may issue invoices as referred
to in this Sub-section.”
(15) The following Sub-section (3) shall be inserted after Sub-section
(2) of Section 15:
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“(3) Notwithstanding anything contained in Sub-sections
(1) and (2), a Local Body or an international organiz tion or
diplomatic mission situated in Nepal or the Governme t of Nepal
or public corporations doing transactions of goods not subject to
value-added tax shall have to collect or recover tax a the time of
sale of value-added taxable goods or services.
(16) Of Section 16:
(a) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) The Department may have continuous access
to the computer database of taxpayers.”
(b) The following Sub-section (3a) shall be inserted after Sub-
section (3):
“(3a) A person who carries on the transactions of
taxable goods or services but is not registered has to
himself or herself certify the account of purchase nd sale
for each financial year. The Tax Officer may at any time
examine such an account.”
(17) The following Section 16A. shall be substituted for Section 16A:
“16A. Records processed by computer to be acceptable as
evidence: (1) Notwithstanding anything contained in the
laws in force, the records relating to taxpayer processed by
the computer installed in the Department or offices
thereunder shall be acceptable as evidence for purposes of
tax, except it is otherwise proved.
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(2) The Department may, by publishing a notice,
make necessary arrangements on the issuance of invoices,
maintenance of accounts, submission of tax returns and
payment through electronic medium."
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(18) The following Section 16B. shall be inserted after Section 16A:
“16B. Deduction of tax paid on goods in the event of loss: In
the event of loss and damage due to arson, theft, accident,
wear and tear or disruptive activity, deduction of value
added tax paid on the goods shall be allowed as
prescribed.”
(19) Of Section 17,-
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) Notwithstanding anything contained in Sub-
section (1), it may be provided that no deduction or only a
partial deduction may be granted in the case of the
prescribed goods that can be used for personal purpose or
for business purpose or for both purposes.”
(b) The following Sub-section (5a) shall be substituted for
Sub-section (5a):
“(5a) The concerned taxpayer shall be allowed to
deduct the tax paid on the capital goods that were
imported or purchased by entering into a loan agreement
under financial lease subject to Sub-section (2).”
(c) The following Sub-section (5b) shall be inserted after
Sub-section (5a):
“(5b) The concerned taxpayer shall be allowed to
deduct tax paid pursuant to Sub-section (2) of Section 8,
Section 12A. and Sub-section (3) of Section 15.”
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(d) The following Sub-section (8) shall be inserted after Sub-
section (7):
“(8) Notwithstanding anything contained
elsewhere in this Section, the name of a taxpayer who
does not submit the tax returns for Six months
consecutively shall be made public, and if there is any
amount due for tax deduction by such a taxpayer, such
amount may be suspended and his or her registration may
also be suspended.”
(20) Of Section 18,-
(a) The words “or by registered post” shall be inserted after
the words “before the Tax Officer” contained in Sub-
section (1).
(b) The following Sub-sections (1a) and (1b) shall be inserted
after Sub-section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), a taxpayer in a district where there is no
Inland Revenue Office may furnish the amount of tax and
tax returns to be paid and submitted by him or her with
the Office of Funds and Accounts Controller of the same
district within the Fifteenth day of the month in which he
or she has to furnish the tax returns. The Office of Funds
and Accounts Controller shall forward the returns of tax
and payment of tax so received to the Inland Revenue
Office within Seven days.
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(1b) The procedures for furnishing and
forwarding the returns pursuant to Sub-section (1) may be
determined by the Department.”
(21) Of Section 19,-
(a) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a taxpayer does not pay the tax within the
time limit specified in Sub-section (1), an extra charge of
Ten percent per annum shall be imposed on the amount of
tax due and outstanding.”
(b) Sub-section (3) is hereby deleted.
(c) The words “pursuant to Sub-section (2)” shall be
substituted for the words “pursuant to Sub-section (2) or
(3)” contained in Sub-section (4).
(d) The words “pursuant to Sub-section (2)” shall be
substituted for the words “pursuant to Sub-section (2) or
(3)” contained in Sub-section (5).
(22) Of Section 20,-
(a) The following Clauses (f), (g), (h) and (i) shall be inserted
after Clause (e) of Sub-section (1):
“(f) If supply is made to the group of company by
making under invoicing,
(g) If transaction is carried out by a person required to
be registered without being so registered,
(h) If sale is made without issuing invoices,
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(i) If tax is collected by an unregistered person.”
(b) The following Sub-section (4) shall be substituted for
Sub-section (4):
“(4) In assessing the tax pursuant to Sub-section
(1), tax assessment shall have to be made within Four
years from the date of submission of the tax returns. If the
tax assessment cannot be made within that period, the
returns so filed shall ipso facto be considered to be valid.”
(c) The following Sub-section (4a) shall be inserted after Sub-
section (4):
“(4a) Notwithstanding anything contained in Sub-
section (4), where any person has evaded tax by preparing
false accounts or invoices or other documents or by f aud,
the Department may at any time issue an order for the
reassessment of tax.”
(23) Of Section 21,-
(a) The following Clause (c) shall be substituted for Clause
(c) of Sub-section (1):
“(c) By selling all or some of the properties of
the taxpayer through sealed quotations or auction
at the same time or various times.”
(b) Sub-section (2) shall be deleted.
(24) The following Section 22A. shall be inserted after Section 22:
“22A. Provision against tax evasion plan: Notwithstanding
anything contained elsewhere in this Act, if any taxpayer
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commits any of the following acts with mala fide intention
to take advantage of tax, the taxpayer shall be deemed to
have committed enticement to evade tax through tax
exemption scheme, and the Director General may order
the Tax Officer to assess the tax of such a taxpayer nd
recover the same:
(a) To lessen the liability of tax by making or doing
any scheme or act with mala fide intention to evade
tax by manipulating any provision contained in this
Act,
(b) If any person or entity does any act with mala fide
intention to lessen the liability of tax or enters into
agreement with that intention.”
(25) The following Sections 23C. and 23D. shall be inserted after
Section 23B.:
“23C. Purchase of goods of under invoicing: (1) If any person
sells any goods by under invoicing, showing the selling
price lesser than the prevailing market price, the Tax
Officer shall, notwithstanding anything contained in the
laws in force, withhold the goods in stock similar to those
goods so under invoiced and sold and the Inland Revenue
Office may purchase or cause to be purchased the sam at
the price under invoiced and sold.
(2) If, in purchasing or caused to be purchased the
goods by the Department or Office pursuant to Sub-
section (1), such a person does not agree to sell the goods,
the Department of office shall take such goods in its
custody, make calculation on the basis of the price at
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which they were under invoiced and sold and make
payment when such a person shows up to receive
payment.
(3) The goods purchased or caused to be purchased
pursuant to Sub-sections (1) and (2) may be sold or
caused to be sold at such price and in accordance with
such procedures as may be specified by the Director
General.”
“23D. Power to make search, seizure or demand deposit or
security: (1) If the Tax Officer finds that any person, firm,
company or organization has done transaction by evading
tax and there is a possibility that the accused may abscond
or the evidence and proof of offence may disappear, the
Tax Office may, with the approval of the Director General,
do or cause to be done any of the following acts:
(a) To seal the place of transaction,
(b) To take custody of the electronic equipment
or records thereof,
(c) To demand cash deposit or wealth guarantee
in a sum equivalent to the tax evaded from
the person believed to have committed the
offence, by executing a memorandum to that
effect,
(d) To withhold the bank account in the name
of taxpayer for up to Three months.
Provided that, where the tax
assessment procedures have not been
completed, the bank account may be
withheld for an additional period of Three
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months with the approval of the Director
General.
(2) The Tax Officer shall have the same powers as
the police may exercise under the laws in force in relation
to the investigation of offences pursuant to this Act.”
(26) The following Sub-section (4) shall be substituted for Sub-
section (4) of Section 24:
“(4) Notwithstanding anything contained in Sub-
sections (2) and (3), any registered person whose export sales for
One month are 40 percent or more of his or her total sales for
that month, and submits an application following the procedures
set forth in this Section for the refund of the amount that is
deductible pursuant to Section 17 shall be entitled to a refund of
the remaining excess in lump sum after adjusting any outstanding
amount.”
(27) The following Sub-section (5) shall be substituted for Sub-
section (5) of Section 24:
“(5) On the submission of an application pursuant to
Sub-section (3) or (4), the Tax Officer shall refund the amount
held to be refundable, and if such an amount is not refunded
within Thirty days after the date of submission of application in
relation to the matter referred to in Sub-section (3) and within
Sixty days in relation to the matter referred to in Sub-section (4),
the Government of Nepal shall have to provide interest on that
amount, as prescribed.”
(28) The following Section 24A. shall be inserted after Section 24:
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“24A. Tax not to be refunded: (4) Notwithstanding anything
contained in Section 24, if an application is not made for
the refund of the amount refundable pursuant to this Act
within Three years after the date of expiration of the
period of tax, such refund shall not be made.”

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(29) Of Section 25,-
(a) The following Clause (a) shall be substituted for Clause
(a) of Sub-section (1):
“(a) If a foreign county grants on reciprocity that t x
exemption facility to Nepalese diplomats whom the
Government of Nepal, Ministry of Foreign Affairs,
has granted diplomatic recognition or to persons
enjoying diplomatic facility and serving in regional
or international missions or institutions, the amount
of tax paid by the Nepal based diplomats of such
country or regional or international missions or
institutions to the extent of consumption by them.”
(b) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) Notwithstanding anything contained in Sub-
section (1), the tax paid by a diplomatic body or diplomat
on the purchase of taxable goods or services shall not be
refunded if the amount purchase is less than One
Thousand Five Hundred Rupees at one time.”
(30) The following Sections 25A. and 25B. shall be inserted after
Section 25:
“25A. Refund of tax paid by foreign tourist on purchase: If a
foreign tourist, visiting Nepal and returning by air,
purchases taxable goods of more than Fifteen Thousand
Rupees and takes them with him or her, the tax paidon
such goods shall be refunded in accordance with the
procedures specified by the Department.
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25B. Return of tax at the customs point in the case of re-
export: If any goods are re-exported, the concerned
Customs Office shall, on the basis of the evidence of re-
export of the goods, make refund out of the deposit
amount in consideration for the value added tax with the
customs by the concerned person.”
(31) The following Sub-section (2) shall be substituted for Sub-
section (2) of Section 26:
“(2) For the purposes of Sub-section (1), the rate of
interest shall be Fifteen per cent per annum.”
(32) The following Sub-section (1a) shall be inserted after Sub-
section (1) of Section 28:
“(1a) If any goods manufactured or prepared within
Nepal, after the completion of export procedures by the Customs
Office or after reaching a foreign country, are re-imported
because of rejection by the concerned party or other reason, and
the same goods are to be exported within Three months of the
import, the goods may be released against the deposit of the value
added tax leviable at the time of such return, and the deposit
shall be refunded after the re-export of such goods. The
concerned Customs Office shall provide the details of amount so
furnished as a deposit and refunded to the Inland Revenue
Office.”
(33) Of Section 29,-
(a) Of Sub-section (1),-
(1) The following Clause (a) shall be substituted for
Clause (a):
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“(a) In the event of violation of Sub-section (1)
or (2) of Section 10, Ten Thousand Rupees
for every tax period.”
(2) The following Clause (b1) shall be inserted after
Clause (b):
“(b1) In the event of failure to place a tax board in
accordance with this Act or the Rules
framed under this Act, a fine of Two
Thousand Rupees for each week and in the
event of failure to place it at the designate
place, a fine of One Thousand Rupees.”
(3) The following Clause (c) shall be substituted for
Clause (c):
“(c) In the event of violation of Sub-sections (1)
and (4) of Section 14, Five Thousand
Rupees for each instance.”
(4) The following Clause (d) shall be substituted for
Clause (d):
“(d) In the event of violation of Section 15, cent
percent amount of tax collected.”
(5) The following Clause (g1) shall be inserted after
Clause (g):
“(g1) In the event of violation of Sub-section (3a)
of Section 16, One Thousand Rupees for
each instance.”
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(6) The following Clause (l) shall be inserted after
Clause (k):
“(l) If a taxpayer who has obtained permission to
making computer billing is found to have
used a software deleting and correcting data,
Five Hundred Thousand Rupees.”
(b) The following Sub-section (1a) shall be inserted after Sub-
section (1):
“(1a) In the event of lessening tax liability without
observing this Act or the Rules framed under this Act, the
Tax Officer may fine up to Twenty Five percent of the
amount of tax, on the grounds as specified by the
Department.”
(2) The following Sub-section (2) shall be substituted for
Sub-section (2):
“(2) If a person commits any of the following
offences, the Tax Officer may impose a fine of cent percent
of the amount of tax or an imprisonment up to Six months
or both the fine and the imprisonment on such a person:
(a) Preparing false accounts, invoices or other
documents;
(b) Committing an evasion of tax by fraud;
(c) If an unregistered person acts as if he or she
were a registered person;
(d) Infringing Section 23C.;
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(e) Carrying out a transaction by infringing
Section 30.”
(34) The following Section 29A. shall be inserted after Section 29:
“29A. Power of Department to order to furnish the amount
of fine: (1) Notwithstanding anything contained elsewhere
in this Act, if any person, prior to the commencement of
proceedings of action, admits in writing that he or she has
committed another offence or more than such offence set
forth in Sub-section (2) of Section 29, the Department my
order such a person to furnish the amount of fine not
exceeding the amount of fine imposable for the
commission of such an offence.
(2) In issuing order as referred to in Sub-section
(1), such an order has to set out the details of such
offence, amount of fine to be paid and date for payment of
the amount of fine.
(3) An order issued by the Department pursuant to
this Section shall be final.”
(35) The following Section 30A. shall be inserted after Section 30:
“30A. Power to order for reassessment of tax: (1) In cases
where, before tax is assessed, it appears from the
information received by the Director General that any
action relating to the assessment of tax is about t be
irregular or has been irregular, the Director General may,
by executing a memorandum clearly setting out the
reasons, give direction to the concerned Tax Officer to
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make reassessment of tax or order any other Tax Officer to
do that act.
(2) In cases where it appears that tax liability has
increased because of tax assessment made by the Tax
Officer recklessly or with mala fide intention, the Director
General may give order to amend such tax assessment
order within Four months after the date of initial t x
assessment.”
(36) The following Section 31A. shall be substituted for Section 31A:
“31A. Application may be made for administrative review:
(1) A person who is not satisfied with any decision of tax
assessment made by the Tax Officer may make an
application to the Department against the decision within
Thirty days of the date of receipt of a notice of that
decision.
(2) In cases where the time limit for making
application pursuant to Sub-section (1) expires andy
person makes an application for the extension of time l mit
within Seven days from the date of expiration of the ime
limit, the Department may extend the time limit for a
period not exceeding Thirty days from the date of
expiration of the time limit.
(3) If the claim of the applicant appears to be true
upon examining the evidence and documents including the
application made by the taxpayer pursuant to Sub-section
(1), the Director General may, by executing a
memorandum setting out the clear reasons, void that tax
assessment order and direct the concerned Tax Officer to
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make re-assessment of tax or order any Tax Officer to do
that act.
(4) The Department shall make decision on the
application within Sixty days after the date of making of
application pursuant to Sub-section (1).
(5) If the Department does not give decision within
the time limit as referred to in Sub-section (4), the
concerned person may make an appeal to the Revenue
Tribunal pursuant to Section 32.
(6) The taxpayer who makes an application
pursuant to Sub-section (1) has to pay undisputed amount
of tax, out of the amount of tax assessed, and furnish a
cash deposit of One Third of the amount of tax in
controversy.
(7) In cases where excess of the amount to be
furnished pursuant to Sub-section (1) has been furnished
prior to the making of application, only the remaining
amount upon deduction of the amount covered by that
amount may be furnished as deposit.
(37) The following Section 32 shall be substituted for Section 32:
“32. Appeal in the Revenue Tribunal: (1) A person who is
not satisfied with an order of suspension made by the
Director General pursuant to Section 30 or a decision
made by the Department pursuant to Sub-section (4) of
Section 31A. may file an appeal in the Revenue Tribunal.
(2) The person who files an appeal pursuant to
Sub-section (1) has to register a copy of the appeal with
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the Department within Fifteen days of the date of filing
appeal.”
(38) The following Section 32A. shall be inserted after Section 32:
“32A. Advance ruling: (1) If any person makes an application in
writing to the Department for the removal of any
confusion as to the application of this Act, the Department
may issue its version by an advance ruling as prescribed,
by notifying the person in writing.
(2) Notwithstanding anything contained in Sub-
section (1), the Department shall not be entitled to issue
an advance ruling referred to in Sub-section (1) on any
matter of confusion occurred in the implementation of this
Act in cases where such matter is sub judice in the court
or has already been decided by the court.
(39) The following Section 34A. shall be inserted after Section 34:
“34A. Power to have expert's service: The Government of
Nepal may obtain the service of the concerned expert for
the act related to tax auditing; and the provision
governmental secrecy mentioned in Section 37 shall also
apply to such an expert.”
(40) The following Sub-section (1) shall be substituted for Sub-
section (1) of Section 40:
“(1) A person who provides information, along
with evidence, showing that a taxpayer has evaded or attempted
to evade all or some portions of his or her tax liability may be
awarded, by a decision of the Director General, as reward the
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amount that is equal to Twenty per cent of the amount of tax
recovered on the basis of that information.”
(41) The following Schedule-1 and Schedule-2 shall be substituted
for Schedule-1 and Schedule-2:
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“ Schedule-1
(Relating to Sub-section (3) of Section 5)
List of VAT exempt goods and services
Group 1. Basic Agricultural Products
(a) Paddy, rice (heading 10.06), wheat (heading10.1 and 10.02),
maize (heading 10.05), barley (heading 10.03), millet (sub
heading 10.08.20), buckwheat (sub heading 10.08.10), pulses
(heading 07.13), flour and rye flour (heading 11.01, 1 .02),
grains (heading 11.04), paddy flakes (bitten rice) (heading
19.04), peas, beans, chickpeas and kidney peas (heading 07.08
and 07.13) and similar basic unprocessed food materials and their
extracts.
(b) Green and fresh vegetable (from heading 07.01 to 07.11)(except
(sub heading 07.03.20), fresh fruits (from headings and sub
headings 08.01.19, 08.03, 08.04.30, 08.04.40, 08.04.50, 08.05,
08.06.10, 08.07 to 08.10), fresh flowers (sub heading 06.03.10),
tuberous roots, corms, fruits, and vegetables and fresh and
unprocessed agro-products (except those to be supplied to hotels,
restaurants, bars, guest houses, cafeteria and other similar
organizations).
(c) Unprocessed cash crops/cereals (such as sugarcane (sub heading
12.12.99), cotton (heading 52.01), cardamom (sub heading
09.08.30), ginger and saffron (sub heading 09.10.10), flax
(heading 53.01 and sub heading 53.03.10)), unprocessed
tobacco, tea leaf sold by farmers(sub heading 09.02.10 and
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09.02.20), tea chest (sub heading 44.15.10), coffee (sub heading
09.01.11 and 09.01.12), soybean (heading 12.01),ground-nuts
(heading 12.02), turmeric(curcuma) (sub heading 09.1 .30), oil-
cake and other solid residues (headings 23.04 and 23.05).
(d) Herbs (including their extracts).
Group 2. Goods of Basic Needs:
(a) Piped water, including water supplied by tankers.
(b) Fuel wood (sub heading 44.01.10).
(c) Coal (heading 44.02).
(d) Salt (sub heading 25.01.00.90).
Group 3. Live Animals and animal products
(a) He-goats (sub heading 01.04.20), sheep and mountain goats (sub
heading 01.04.10), yak and buffalos (heading 01.02), bore and
pigs (heading 01.03), rabbit (sub heading 01.06.19) and their
unprocessed raw edible food items (from headings 02.01 to
02.04, heading 02.06).
(b) Cows and she buffalos (01.02), she goats (01.04.20), and their
fresh milk (04.01), (including pasteurized), curd (04.06.100, bees
(01.06.90) and bee hives (44.15.100 and bee keeping machinery,
including germination plant, metal barrel, bee brush, base roller,
gear pump and wheel plate (heading 84.36) and bee harv sting or
threshing machinery (heading 84.33).
(c) Ducks, hens, cocks, turkey and similar other birds (heading
01.05) their fresh meat and unprocessed raw items (heading
02.07) and eggs (heading 04.07).
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(d) Fresh or dried fish (other than packed) (heading 03.01) (from sub
heading 03.02.33 to o3.02.36, except 03.02.700 (heading 03.03
(except sub heading 03.03.80, sub headings 03.07.41 and
03.07.49)
4. Agricultural inputs
(a) Crops, grasses, flowers or live trees and other plants, bulbs,
tubers, tuberous roots and bulbs and roots used as seeds
(headings 06.01, 06.02, 06.04, and 12.09).
(b) Manure, fertilizer and soil conditioners (Chapter 31).
(c) Hand tools, spades, shovels, mattocks, picks, hoes, forks and
rakes, axes, bill hooks and similar hewing tools, secateurs of any
kind, scythes, sickles, hay knives, other than hand saws, hedge
shears, timber wedges, ploughshare and other tools of a kind used
in agriculture (heading 82.01).
(d) Insecticides, rodenticides, fungicides, herbicides and de-ratting
drugs as mentioned in Chapter 38 of Customs Tariff used only for
crops (sub headings 38.08.91.90, 38.08.92, 38.08.93, 38.08.99)
(e) Tractors (heading 87.01), cultivators (sub heading 84.32.29),
tantalum (sub heading 84.32.21), levelers (sub heading
84.32.80), harvesting or threshing machine (heading 84.33),
threshers (sub heading 84.33.52), fishing nets (sub heading
56.08.11), ready-made cages for aquaculture, fish incubators,
pumping sets with engines from Two to Eight horse power and up
to 30 meters hose pipe accompanied with the sets, used in
irrigation works.
(f) Raw materials of deed supplements falling under Chapters 23, 28
and 29 of the Customs Tariff, animal feeds and feedsupplements
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falling under Chapter 23 of the Customs Tariff, and lime stone
dust, bone dust and fish dust falling in Chapter 25.
(g) Special kind of utensils for feeding poultry feed except normal or
general utensils, and special kinds of utensils for feeding water to
poultry.
Group 5. Medicine, Medical and Similar Health services
(a) Health services (other than health services provided by the
institutions registered with the value added tax).
(b) Human blood and human blood items and vaccines, (heading
30.020) plastic blood bags, transfusion sets, testing kits, and
various tools, equipment and chemicals required for building
reagents and blood test reagents that are imported by the Nepal
Red Cross Society and required for blood transfusion ervice.
(c) Human or animal organs or tissue for medical research (heading
30.01).
(d) Medicaments for treatment of livestock and human beings and
family planning means (headings 30.03, 30.04 (except
Chwanpras) sub heading 40.14.10).
(e) Pacemakers used in treatment of heart diseases (90.21.50),
equipment required for the treatment of kidney disease, bath
concentrate solid or liquid used in dialysis (38.24.90), goods
made for, and suitable only for the use of, infirm and disabled
persons, (including scooters) 987.13.10 and 87.14.20).
(f) X-ray film (sub heading 37.02.10) and oxygen gas to be used for
treatment (sub heading 28.04.40) and bandage (heading 30.05).
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(g) Raw materials for drug industries: metal salts, oxides and hydro-
oxides used by drug industries and in the production of IOL,
falling under Chapter 28 of the Customs Tariff, as well as raw
materials of drugs (active ingredients of drugs) and raw materials
used by drug industries in production of drugs or in production of
IOL , and packing materials and equipment falling under
headings 90.18 and 90.27 used in the research and development
of industries and hospitals on the recommendation of the
Department of Drug Management.
Group 6: Education
(a) Research related acts in schools or universities.
(b) Vocational or professional trainings or refreshr trainings.
provided by institutions fully owned by the Government of
Nepal.
(c) Educational services provided by schools and universities.
Group 7: Books, newspapers and printed materials
(a) Books, calendars, newspapers, magazines (headings 49.01,
49.02, 49.04) and printing and publication thereof.
(b) Newsprint (heading 48.01).
Group 8: Artistic and cultural goods and services, carving services
(a) Painting, handicrafts, carving and similar other andicrafts and
related services.
(b) Cultural programmes.
(c) Admission fees to libraries, museums, art museums, zoos and
botanical gardens, and national parks.
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Group 9: Passengers and goods transportation services
Air transport, passenger transportation (except cabal car) and goods
carrier service (except transportation related to supply) and cargo
services for the purposes of exports
Group 10: Personal or Professional service:
Personal services rendered by artists, sportspersons, authors, writers,
designers, translators and interpreters institutionally or individually, and
services of supplying human resources to foreign countries.
Group 11: Other goods or services:
1. Agriculture products storage services provided by cold storage.
2. Postal services (only those provided by the Governm nt of
Nepal):
(a) Services of conveyance or transfer of letters, money and
postal packets,
(b) Other services required for the services of conveyance or
transfer of letters, money and postal packets,
(c) Postage stamps (heading 49.07),
(d) Services provided by the Government of Nepal.
3. Excise duty stamps and passports (heading 49.07), cash machines
(sub heading 84.70.90)
4. Financial services, life insurance services and reinsurance
services.
5. Bank notes, coins and cheque books:
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(a) Printing and issue of bank notes.
(b) Supply of bank notes from foreign countries into Nepal
(heading 49.07).
(c) Cheque books (heading 49.07).
6. Gold and silver:
(a) Gold (heading 71.08), gold coins (sub heading 71.18.90),
gold ornaments (heading 71.13) and diamond ornaments.
(b) Silver (heading 71.06), and silver coins (sub heading
71.18.90), silver ready-made goods and ornaments
(heading 71.13).
7. Electricity supply.
8. Raw wool (heading 51.01).
9. Battery operated tempo (sub heading 87.03.21.10) and their
chassis (sub heading 87.06.00.15).
10. Bio-gas, solar power and wind power operated power generation
plants and their equipment and tubular battery, on the
recommendation of the Alternative Energy Promotion Centre.
11. Aircrafts and helicopters (heading 88.02(except sub heading
88.02.60) and their engines (sub heading 84.09.10, gear box (sub
heading 88.05.10), fire brigades (sub heading 87.05.30),
ambulances and corpse carrying vehicles (heading 87.02 and
87.03).
12. Jute batching oil (sub heading 27.10.19.13) andjute products
(headings 53.06, 53.07 and 53.10).
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13. Mills, machineries and equipment, molding keys (except spare
parts) other than those that can be used in household attracting
up to 5 percent customs duty as falling under Part 84 of the
Customs Tariff.
14. Woolen carpet and woolen carpet weaving, dying, washing and
knitting.
15. 100 percent cotton sari, Lungi, Dhoti (for both men and
women), Petani, Gamcha and cotton yarn (headings 52.05 and
52.07).
16. Woolen yarn to be used in hand knitting sweater (except artificial
and acrylic) domestically.
17. Donated goods received for any natural calamities or
philanthropic purpose, as approved by the Ministry of Finance,
Government of Nepal.
18. Goods of personal use that do not attract customs duty and are
imported under the Luggage and Baggage Order facility.
19. Amount equal to such tax as deemed payable that remains
balance upon deducting the tax paid on purchase from the tax
collected on the sale of goods by textile, match (only wooden
stick) and tyre-tube industries shall be refunded to these
industries in accordance with the procedures specified by the
Department.
20. Only Twenty Five percent of the amount equal to such tax as
deemed payable that remains balance upon deducting the tax
paid on purchase from the tax collected on the sale of products
(flour) by flour industries shall be refunded to these industries in
accordance with the procedures specified by the Department.
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21. Fifty percent value added tax of the value added tax collected by
domestic industries producing mustard oil on selling their
products of mustard oil and by industries producing Vanaspati
ghee and other processed edible oil domestically to the taxpayers
registered with the value added tax shall be refunded to these
industries in accordance with the procedures specified by the
Inland Revenue Department. Provided that, the packaging
industries that import processed oil in bulk and refilling the oil in
consumer packages and sell the same shall not be entitl d to such
a facility.
22. If any native industry that manufactures cellular mobile phone
sets and importer thereof submits evidence that they have sold
the tax paid on the raw materials of cellular mobile phone sets or
readymade goods to the taxpayers registered with the value added
tax, sixty percent shall be refunded in accordance with the
procedures specified by the Department.
23. The value added tax shall be exempted in relation to imports of
such machinery, equipment, tools and their spare pats, penstock
pipes or iron sheets used in making thereof as required for hydro
power projects and as are not produced in Nepal, on the
recommendation of the Alternative Energy Promotion Centre, in
the case of those which are operated with the approval f that
Center, and on the recommendation of the Electricity
Development Department, in the case of the industries except
those which are operated with the approval of the Alt rnative
Energy Promotion Center.
24. The value added tax shall not be levied on transferring any motor
vehicles that were imported by any foreign mission or donor
agency with the enjoyment of the diplomatic facility or tariff
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facility to the project itself in consonance with te approval
annual program of the project and converting their number plates
into governmental ones or on transferring, with theapproval of
the Ministry of Finance, any motor vehicles that were imported in
the name of any project with the enjoyment of full or partial tariff
facility (except those imported on inventory or bank guarantee)
to any governmental body after the completion of the project and
converting their number plates into governmental ones.
25. If any diplomatic body, project or other body (governmental as
well as non-governmental organization) intends to scrap and
cancel the registration of any motor vehicle that it has imported
with the enjoyment of the tariff facility and that is more than 15
years old after the year of initial production, with the approval of
the Ministry of Finance, the value added tax shall not be levied
on such a motor vehicle.
26. If the owner of a motor vehicle imported by a citizen of Nepal for
personal use with the enjoyment of value added tax exemption
dies and the motor vehicle has to be transmitted to the husband
or wife of the owner of motor vehicle, the value adde tax shall
not be levied on such a motor vehicle on the basis of the approval
of the Department.
27. If any industries that have not enjoyed the facility of bonded
warehouse or passbook import the raw materials, subsidiary raw
materials, and packaging materials that are not produced in
Nepal, required for the production of goods to be exported by
them and export the goods produced from such raw materials in
accordance with such procedures and within such period as
prescribed, the value added tax levied on such raw materials,
subsidiary raw materials and packaging materials at the customs
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points while importing them shall be refunded from the customs
point in relation to such goods, from such a date and on such pro
rata as specified in a notice published in the Nepal Gazette.
28. The following goods to be imported in the name of Nepal Army,
Armed Police Force and Nepal Police Headquarters shall enjoy
exemption, on the recommendation of the concerned Ministry:
(a) Ammunitions, arms, gunpowder and their spare parts,
special kind of oil, accessories, explosives to be us d by
Nepal Army, Armed Police Force and Nepal Police, raw
materials required to produce army materials and
machineries, tools and spare parts used for security.
(b) Machineries and equipment required for maintaining peace
and security, crowd control materials, equipment and
other goods required for the investigation of crimes, and
communication materials to be used by personnel of Nepal
Army, Armed Police Force and Nepal Police, on the
recommendation of the Ministry of Communication.
(c) Such equipment, materials, drugs and related goods as
required for the treatment of Army personnel, armed
police and Nepal police personnel and of horses.
(d) Goods used in the exercise and training of Army, armed
police and Nepal police personnel.
(e) Heavy earth moving plant, tool and parts related thereto,
optical equipment used in engineering survey and
construction works carried out by Nepal Army, and such
defense store goods as specified by the Ministry of
Defense.
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(f) Camping equipment used by Nepal Army and various
goods required for special force and paratroopers.
(g) Aircrafts, helicopters and their spare parts, parachute
(including bags), tools, lubricants and ground equipment
imported in the name of Nepal Army.
(h) Equipment and tools required for the operation f
hospitals.
(i) Goods required for scientific laboratories.
(j) Goods used in natural calamity relief works.
Group 12: Lands and buildings
Purchase, sale and rental of lands and buildings (except the
services provided by such entities carrying on business such as
hotels and guest houses)
Group 13: Betting, casinos and lotteries
Activities relating to facilities provided for the organization of
bets or gambling, and lottery.
Note:
(1) The value added tax shall be exempted only on the goods and
services specifically mentioned in the foregoing headings and sub
headings. The Department may, as required, and in consultation
with the Department of Customs, alter and revise the
interpretation of the goods and services enjoying tax emption and
the Harmonized Code of Commodities.
(2) Given that as mentioned above vanaspati ghee and mustard oil,
flour and cellular mobile phone sets produced domestically enjoy
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partial facility and tax refund is made accordingly, the Inland
Revenue Department shall make provision of coordinatio
including the market monitoring of these goods.
(3) If the Government of Nepal considers reasonable to grant any
exemption to any taxable goods or to refund tax, it may grant
such exemption by publishing a notice in the Nepal G zette.
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Schedule-2
(Relating to Sub-section (2) of Section 7)
Goods and services subject to zero rate
1. Goods exported from Nepal: If it is proved that goods are supplied as
follows:
(a) Goods exported outside Nepal, or
(b) Goods shipped for use as stores on an international flight of
which destination is outside Nepal, or
(c) Goods put on board an international flight of which destination is
outside Nepal for retail sale or supply or consumption.
2. Services to be supplied to persons outside Nepal:
(a) A supply of services by a person residing in Nepal to a person
outside Nepal, who has no business transaction, business
representative or legally recognized agent in Nepal.
(b) A supply of goods or services by a person who is residing and is
registered in Nepal to a person who is residing outside Nepal.
3. Goods or services imported by a person or mission enjoying diplomatic
facility and a person serving in a diplomatic mission enjoying tariff
facility, on the recommendation of the Ministry of Foreign Affairs,
Government of Nepal.
4. If any previous treaty or agreement provides for the sales tax exemption
on imports, and local purchase is made from the registered taxpayers, on
the recommendation of the concerned project, the facility of zero rate
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shall be provided on such supplies, so long as suchtreaty or agreement
is in effect.
5. Raw materials to be sold to and goods manufactured by any industries
established pursuant to the laws in force and operated in the special
economic zone.
6. If, on the recommendation of the Alternative Energy Promotion Centre,
the battery used in the equipment and mechanism generati g energy
from solar power is produced by any native industry and is to be
supplied by that industry, the facility of zero rate shall be provided to
that industry on that transaction on the recommendation of Alternative
Energy Promotion Center and in accordance with the procedures
specified by the Department.
7. If any machinery, equipment, tools and their spare parts, penstock pipes
or iron sheets used in making thereof required for hydro power projects
are produced by any native industry and are to be supplied by that
industry, the facility of zero rate shall be provided to that industry on
that transaction, on the recommendation of the Alternative Energy
Promotion Centre, in the case of a project that is operated with the
approval of that Centre, and on the recommendation of the Electricity
Development Department, in the case of one other than at operated
with the approval of the Alternative Energy Promotion Centre and in
accordance with the procedures specified by the Department.
8. If painting, handicrafts, carving and similar other handicrafts produced a
cottage and small scale industry within Nepal are exported through an
approved export trading house of Nepal, the value added tax paid on the
raw materials used in the manufacture of such goods shall be refunded
after fulfilling the procedures specified by the Inla d Revenue
Department.
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9. The value added tax paid on the import or local purchase of scooters
used by persons with disabilities shall, if such scooters are registered in
their name in the Office of Transport Management, be refunded on the
recommendation of the Women, Children and Social Wefare or the
Chief District Officer of the concerned district, and in accordance with
the procedures as specified by the Department of Inland Revenue. If
such goods are sold to any persons other than the persons with
disabilities, the refunded value added tax shall be recovered.