In Nepal, businesses are required to register for Value Added Tax (VAT) often referred to as GST in global contexts if their annual turnover exceeds NPR 5 million. VAT is a consumption-based tax levied on goods and services at each stage of the supply chain, ensuring transparency and accountability in business transactions.

This guide provides a step-by-step process for VAT registration in Nepal, along with compliance requirements, benefits, and FAQs for 2025.

Legal Framework for VAT in Nepal

VAT in Nepal is governed by:

• Value Added Tax Act 2052 (1996)

• VAT Rules 2053 (1997)

• Inland Revenue Department (IRD) Guidelines

The Inland Revenue Department (IRD) is the primary authority for VAT registration, filing, and enforcement.

Who Needs VAT Registration?

• Businesses with annual turnover above NPR 5 million

• Importers and exporters of goods and services

• Service providers (consultancy, IT, hospitality, etc.)

• Manufacturers and wholesalers

• Voluntary registration for businesses below NPR 5 million turnover (to claim input tax credit)

Step-by-Step VAT Registration Process in Nepal

Step 1: Prepare Required Documents

• Company registration certificate

• PAN certificate

• Tax clearance certificate (if applicable)

• Office address proof (rental agreement or ownership papers)

• Citizenship certificate of proprietor/directors

• Passport-size photos

Step 2: Apply Online

• Visit the IRD portal: https://ird.gov.np

• Fill out the VAT registration form

• Upload scanned copies of required documents

Step 3: Submit Physical Documents

• Print application form and documents

• Submit to the nearest Inland Revenue Office

Step 4: Verification

• IRD verifies documents and business premises

• May conduct inspection for authenticity

Step 5: Receive VAT Certificate

• Once approved, IRD issues a VAT Registration Certificate

• Businesses must display the certificate at their premises

Compliance After VAT Registration

• Issue VAT invoices for every sale

• File monthly VAT returns within 25 days of the following month

• Maintain proper accounting records

• Pay VAT via ConnectIPS, eSewa, or bank deposit

• Renew registration annually if required

Benefits of VAT Registration

• Legal compliance and avoidance of penalties

• Ability to claim input tax credit

• Enhanced credibility with banks and investors

• Eligibility for government tenders and contracts

• Transparency in transactions

Penalties for Non-Compliance

• Failure to register: Fine up to NPR 50,000

• Late filing: NPR 100 per day + interest

• False invoicing: Fine + imprisonment up to 1 year

• Tax evasion: Severe penalties under VAT Act

Conclusion

VAT registration in Nepal is not just a legal requirement it’s a strategic advantage for businesses. By registering, issuing proper invoices, and filing returns on time, companies can build credibility and access opportunities in both domestic and international markets.