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VAT Compilation CAP II
VAT Compilation CAP II
1. Registration: Mention the provisions related to mandatory registration under Value Added Tax Act,
2052.
2. Application of VAT: Cosmos p. ltd having its registered office in Jawalakhel, Lalitpur transferred
some goods costing Rs. 1 million to its branch at Bangladesh. In the same month, the Bangladesh
branch transferred some goods costing Rs. 500,000 to its head office in Nepal. Gross profit Margin of
head office is 20% and that of branch is consolidated at the end of each FY in books of Head Office.
Discuss the VAT impact on above transactions.
3. Place of Supply: A lawyer practicing in Nepal provides consultancy service to a legal firm in United
Kingdom. The legal firm of the UK used that service to release a person in USA. Where is the place of
supply of service as per VAT Act/Rules?
4. Time of Supply: You are a tax expert. Answer stating the provisions relating to “Time of Supply” as
per Value Added Tax (VAT) Act, 2052, what happens when:
i) A customer takes delivery of the goods from the business place before the supplier issues invoice.
ii) A customer paid NPR 10,000 to a supplier along with a list of certain goods to be supplied to the
customer. As per the list the total goods are worth NPR 12,000
iii) A supplier at Kathmandu receives order for supply goods from a customer from Pokhara. The
supplier packs the goods as per the order, asks a labor to deliver the goods to the transporter and the
transporter gives delivery of the goods to the party of Pokhara at Pokhara. When the buyer receives
the goods, the supplier issues the invoices.
5. Types of Registration.
6. NO VAT and Zero VAT: Tax Accountant of Subhashree & Co. contends that the terms “Zero VAT”
and “No VAT” have the same meaning. As a Tax Expert, express your opinion within the framework
of VAT Act, 2052.
7. Application of VAT: State the following goods or services are VAT able (Taxable) or not with the
provision of the Act.
(a) Fresh Water P. Ltd is running the business of supplying water in tanker.
(b) Reinsurance of general Insurance.
(c) Cargo Service for import
(d) Ujyalo Hydro power development company Ltd running its business of hydropower generation and
consultancy on hydropower construction registered in PAN for Income tax only. Its consultancy
income for the Year 2075/76 is Rs. 30 lakhs. What if consultancy income is Rs. 11 lakhs?
8. VAT Registration: Nepal Philanthropic Society is a ―Company not Distributing Profit registered
under the Company Act, 2063. The source of fund of this company comes from membership fees,
donation from the member groups and other outsiders. The company deals with various goods other
than those mentioned in schedule 1 to VAT Act 2052. Annual turnover of this company ranges from
Rs. 50 lakh to 75 lakh every year. Though profits earned by the company are not for the distribution
amongst its members, more than 50% of its profits are utilized towards activities related to the
Corporate Social Responsibilities (CSR) every year. The members of the company when approached
by IRD staffs for VAT registration contended that the company need not be registered in VAT. As you
are the tax consultant of the entity you are required to comment this statement by the company.
10. Business Transfer: Mr. Prakash was engaged in the hardware business and now wants to quit from
this business. He wants to sell and transfer the business to a willing buyer. He has the followings assets:
Furniture & Fixtures Rs. 300,000 made to order but no VAT paid
Computer System Rs. 100,000 purchased by paying VAT
Hardware Stock Rs. 2,500,000, out of which Rs. 20 lakhs was VAT paid
Mr. Dark offered to purchase the business for Rs. 2,600,000 and approached the VAT office for
effecting the transfer. What are the procedures to be adopted, various commitments required and VAT,
if any, to be paid by Mr. Dark?
11. Temporary Registration: PQR Pvt. Ltd. is engaged in supply of taxable goods and is an unregistered
under VAT. There is an exhibition scheduled on Poush 3, 2073 and the company wants to participate
in the exhibition for promoting its products. Exhibition is for a period of one week. Since the company
is unregistered, it claims that registration is not mandatory as its participating in exhibition for a week
only. In other hand, Tax Officer demanded deposit of Rs. 500,000 citing the reason that the company
is participating in exhibition. Also, Tax Officer asked for the submission of tax return. Since the
transactions occurred on Poush, 2073, the company is in the view that it will submit tax return by Magh
25, 2073.
Comment referring to the provisions of VAT Act/Rule. Also, mention the fine to be paid by the
company, if any, on non-compliance of registration.
12. Taxable Value: M/s Thirsty Drinkers Ltd. has sold a kind of drink to non VAT registered party for Rs.
10,000. As per the retail price published by the same company under the direction of IRD, the retail
price is Rs. 12,000. The company has collected VAT from the party on the amount of Rs. 10,000 saying
that it has given the trade discount to the party and the trade discount can be deducted to arrive at the
transaction value. But the assessing officer insists to collect VAT on the published price. As an expert,
give your opinion on this.
14. VAT on Used Goods: Kathmandu reconditions has following transaction details for the month of
Chaitra 2071. Calculate the VAT payable/receivable for the month, assuming that the transactions are
of used goods.
Purchase (including VAT) Sales (excluding VAT)
(Rs.) (Rs.)
Chairs 20,000 25,000
Motorbike 35,000 45,000
Refrigerator 10,000 9,000
Cupboard 8,000 7,000
Bookshelf 12,000 15,000
Scooter 25,000 In stock
What would be your calculation if the transactions were of brand new goods and not the reconditioned
goods?
15. Sharma & co, a registered person dealing in second hand vehicles has purchased a secondhand
motorcycle for NPR 10,000 plus chargeable VAT on it. The following expenses are incurred for repair
of the motorcycle to make it saleable;
Particulars Amount (NPR) VAT (NPR)
Spare Parts 4,000 520
Labor Charges 2,000 0
The person sells the motorcycle for NPR 20,000. Calculate the taxable value of the motorcycle as per
VAT Act, 2052.
16. VAT on Wood: Compute, how much VAT amount can be claimed for refund by the trade link on 30
Shrawan 2071.
Nepal Government has determined the Royalty @ Rs. 800 per cu.fit on wood for national forest.
suppliers submitted a bid quoting @ Rs. 900 per cu.fit for 2000 cu.fit wood to Kathmandu forest office
to purchase the wood on auction. The suppliers have been awarded the auction of the wood. In addition,
the suppliers have purchased 1000 cu.fit wood from co- operative forest @ Rs. 700 per cu.fit for its
business. Determine the VAT amount on these purchases with reference to the provisions of Value
Added Tax Act, 2052.
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Value Added Tax
17. VAT Collected by INGO: A foreign embassy in Kathmandu sells its used car for Rs. 30 lakhs to an
INGO, a tax exempt entity. VAT office demanded tax on the sale of car from the embassy. The embassy
denies its liability to pay tax as it enjoys diplomatic facilities in Nepal. The INGO states, since it is a
tax exempt entity it need not pay any tax. Advise the parties, giving consideration to the provisions of
Value Added Tax Act, 2052.
18. VAT to Unregistered Person: What are the circumstances where an unregistered person needs to pay
VAT on his transactions similar to as registered person?
19. Refund to Tourist: Mr. Banwarilal, an Indian tourist, visited Nepal in the year 2016. He purchased
taxable goods of NPR 16,000 from Pokhara and decided to take the purchased goods along with him
while going back to India via Sunauli boarder by his own vehicle. He seeks your advice on refund of
VAT paid by him on purchase of such goods. What would be your answer if he had purchased the
taxable goods worth NPR 26,000 instead of NPR 16,000?
20. Refund to Tourist: Mr. John entered to Nepal via Birgunj with his family on 1st Aswin 2072 and
visited so many places in Nepal. The detail of few expenses incurred in Nepal by Mr. John & his family
members are as follows:
Amount paid to tour operator for family tour package amounted to Rs. 339,000 including Rs.
39,000 applicable VAT.
i) Mr. John purchase one laptop costing Rs. 100,000 and paid applicable VAT on it.
ii) Mr. John Paid to Hotel in Kathmandu for cost of lodging, foods & other services Rs. 226,000
including Rs. 26,000 VAT.
iii) Mr. John with his family visited orphanage home in Kathmandu and donated a fridge costing Rs.
50,000 and paid applicable VAT on it.
At the time of departure from Tribhuvan International Airport, Kathmandu, Mr. John submitted all vat
invoices to the counter of IRD and Mr. John is carrying the laptop purchased in Nepal along with all
his other belongings.
Advise Mr. John how much VAT refund he will get.
21. Reverse VAT: Saurav Publication prints the various books and sells to the wholesaler. The Company
itself has constructed a building for its Publication House. The cost of construction was as follows:
Labour charges Rs. 30,00,000
All Material (Cement, rod etc) purchase cost Rs. 5,50,000 inclusive VAT.
State the VAT Implications on this case, if applicable with references to VAT Act, 2052 and rules,
2053.
22. Reverse VAT: TAR Construction P. Ltd. hired a Technical Expert from India for consultancy service
architect design of Hydropower projects on contract basis. The consultant charges NRs. 621,500
towards his service. Quantify the amount of taxes to be deducted from his payments and deposited at
the Inland Revenue Department.
23. Reverse VAT: Consider who should pay and how much VAT in the following circumstances with
Developed and Compiled by CA. Shesh Mani Dahal 4
Value Added Tax
explanations according to the relevant section and rules:
a) Mr. Buddhi Bahadur builds his house through a contractor who is not registered in VAT for own
living. The total value of the contract comes to Rs. 90 lakhs. He gets built another house from the
same contractor for a cost of Rs. 45 lakhs for letting out on hire.
24. Reverse VAT: Sayami Infosys Pvt. Ltd. deals in computer and related IT technology business. In the
course of its business, it received services from Magnet Technology Corp., Japan. Magnet Technology
Corp., raised bill of Rs. 21.60 Lakhs against the services provided. Management of Sayami is confused
as to whether VAT shall be charged or not?
Advise the management of Sayami as regards to VAT applicable in this case and net payment to be
sent. Specify the provision of VAT Act, 2052 in this regards. (Ignore other taxes, if applicable).
25. Reverse VAT: What are the provisions with regards to collection of VAT on construction of
commercial building/ apartment/ shopping complex?
26. Reverse VAT: The owner of the building who constructed the building at a cost of Rs. 4 lakhs for the
purpose of his business paid VAT of Rs. 40,000 on account of non-submission of VAT bills for
purchase of materials and labour under section 8(3) of the VAT Act. Can the businessman set off this
VAT payment of Rs. 40,000 against his VAT liability on sales he makes when he starts his business of
trading?
27. Bank Guarantee: Naya Nepal Ltd. is engaged in the business of manufacturing juice. The product of
the Industry has good market in India and Nepal. The company exports the juice to India as well as
the same is sold in the local market. Sales turnover of the company for the following quarters are as
follows:
The company is scheduled to export 900 M tones of the juice to India and the necessary raw materials
are imported at CIF value at Raxaul from South Africa for Rs. 80 lacs. Also the company is scheduled
to import raw materials amounting to Rs. 20 lacs for the local sales. The company seeks your advice
on whether it avails Bank guarantee facility against VAT. If yes what would be the amount of Bank
Guarantee required.
28. General Household Pvt. Ltd. provides you the following information:
Particulars Period Amount
Total Sales 2074 Baishakh to Chaitra 4,054,000
2074 Chaitra 360,000
Export 2074 Baishakh to Chaitra 2,400,000
2074 Chaitra 200,000
The company seeks your opinion based on Value Added Tax Act, 2052 and wants to know:
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Value Added Tax
a. Does the company get bank guarantee facility for importing finished goods?
b. Does the company get bank guarantee facility for importing raw materials?
c. Does the company get tax refund facility in the month of return submission?
29. Bank Guarantee and VAT Refund: Heat & Cool Pipe Industry Ltd. is a pipe manufacturing company.
The raw material imported during various months are as follows:
The company marks up 15% to its product. The selling price is same for local and export market. Raw
material required per kg of output is 2 kg.
i) Determine whether the company can claim bank guarantee facility for VAT at the time of
import of raw material. Also specify the provisions of VAT Act, 2052 in this regards.
ii) The company's VAT account showed following balances. Can company claim refund
immediately after closure of month? Specify the provision of the VAT Act.
30. VAT Refund: M/s ABC Limited has shown the following sales and purchases without VAT. The
policy of the company is to claim VAT refund as and when eligible as per the VAT Act. Calculate the
amount of credit and refund that can be claimed in each month by mentioning the relevant provision of
the act.
Months Sales Purchases Export
Bhadra 500,000 600,000 45%
Ashwin 520,000 500,000 25%
Kartik 600,000 500,000 45%
Mangsir 450,000 500,000 35%
Poush 320,000 500,000 45%
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Value Added Tax
Magh 400,000 500,000 25%
Falgun 350,000 500,000 35%
31. VAT Refund: Rai Pvt. Ltd. working in Bhojpur has the following amounts of sales and purchases
excluding VAT. Can VAT refund be claimed in Falgun return?
Month Sales Purchase
Bhadra 500,000 600,000
Aswin 520,000 500,000
Kartik 520,000 500,000
Mangsir 450,000 500,000
Poush 320,000 500,000
Magh 400,000 500,000
Falgun 350,000 500,000
32. Deregistration: Mr. Ram has taken voluntary registration in VAT on 2070.05.02. He feels it
troublesome to comply with legal requirements of VAT Act, and wish to cancel his registration. He
seeks your assistance in this regards. Answer the following queries placed to you by Mr. Ram:
i) When can he apply for cancellation of registration?
ii) The books of Mr. Ram showed following balances at the date of cancellation.
Account head Closing balance (Rs.) Market value on date of cancellation (Rs.)
Items on Items on Total Items on which Items on which Total
which VAT which VAT VAT input was VAT was not
input was was not claimed. claimed.
claimed. claimed.
i) Inventory 10 lakh 5 lakh 15 lakh 12 lakh 7 lakh 19 lakh
What shall be the tax implication on the above items on the date of cancellation? State the provision
of Act.
33. VAT Calculation: Sankshi Pvt. Ltd trading company has its Branch office in Thailand, Bangkok,
Singapore and China. It has adopted the International Financial Reporting Standards (IFRS/IAS) for
preparation and presentation of Financial Statements. In the months of Falgun end 2073 sales in the
Head office is NPR. 50 Million and sales from Thailand, Bangkok, Singapore and China is NPR.
60Million, NPR. 70 Million, NPR. 80 Million and NPR.100 Million respectively. With considering the
VAT Act 2052, how much Vat Need to pay, if input tax credit is NPR. 5 Million.
34. VAT Calculation: M/s Ankur Plastics has the following transactions, calculate the amount of VAT
payable or receivable for the month of Jestha 2068. Rs.
i) Purchase of Raw material 650,000
ii) Purchase of packing material 100,000
iii) Purchase of Fuel for generator 23,000
35. VAT Calculation: Calculate net VAT payable after deducting available concession based on following
information of Kathmandu Private Limited, a VAT registered match (wooden stick) and incense sticks
Udhyog, for the tax period of Baishakh 2071.
Purchase of VAT exempted raw material Rs. 2,500,000
Plant consumables Rs. 250,000 plus VAT
Bus for staff transportation Rs. 1,130,000 including VAT
Sale of Match (wooden stick) Rs. 1,500,000 excluding VAT
Sale of incense sticks Rs. 600,000 excluding VAT
Export sale of incense sticks Rs. 800,000 excluding VAT
36. VAT Calculation: M/s Makalu Food and Beverages had following VAT attractive transactions in the
month of Poush 2068. From these details and notes below, calculate the
VAT payable/receivable for the month of Poush.
37. Proportionate VAT Credit: Mr. Pure operates dairy and is registered to VAT. His transaction for first
month of operation are as follows:
Developed and Compiled by CA. Shesh Mani Dahal 8
Value Added Tax
Particulars Quantity Amount
38. XYZ Pvt. Ltd. imports/purchases the taxable raw materials such as Iron Ingots and Steel Plates to
manufacture them into different furniture items as well as agriculture tools.
Details of total imports excluding Input VAT are as follows:
Cost of Iron Ingots declared by XYZ Pvt. Ltd. Rs. 3,00,000
Revised cost fixed by Customs Officer Rs. 3,50,000
Freight Rs. 50,000
Insurance Rs. 5,000
Import Duty @ 6%
In addition, it has also purchased following raw materials:
Steel plates (exclusive of VAT) Rs. 1,00,000
Woods (exclusive of VAT) Rs. 35,000
The products manufactured out of the above raw materials are sold out with the details as given below:
Agriculture tools (VAT exempt items) Rs. 2,50,000
Furniture Rs. 3,00,000
Find the ratio between taxable and non taxable sales and calculate the amount of Input VAT that XYZ
Pvt. Ltd. is entitled to claim under sec 17 (3) of VAT Act.
39. VAT Calculation: Janaki Garment Pvt. Ltd. engaged in production of readymade wear and registered
40. VAT Calculation: Supreme Garment Pvt Ltd had the following transaction in the month of Ashwin
2069. Calculate the VAT payable/receivable from the information below.
Particulars (Rs.)
Purchase of clothes 3,500,000
Material for stitching 200,000
Packing materials 300,000
Special packing for export 200,000
Loose tools for machineries 50,000
Payment of consultancy charges abroad 250,000
Purchase of bus for staff transportation 1,000,000
Purchase of motorcycle of hire purchase 200,000
Additional information:
Opening VAT receivable for the month was Rs. 45,780
Diesel for bus for Rs. 8,000 and soft drinks for Rs. 3,000 was purchased through abbreviated tax
invoice. Stationery was purchased from non-registered vendor. Items above are exclusive of VAT.
41. VAT Calculation: M/s ABC Pvt. Ltd. deals in purchase and sales of various items. During a month, it
has made the following transactions. Calculate the amount of allowable Input Tax Credit.
Purchase (Rs.) Sales (Rs.)
Asparagus 5,000 10,000
Onions and Shallots 5,000 5,000
Fish Fillets 5,000 2,500
Livers and Roes 5,000 2,500
Shorn Wool 5,000 5,000
Garlic 20,000 10,000
Potato 20,000 30,000
Green Tea 5,000 10,000
Black Tea 10,000 5,000
42. Proportionate VAT Credit: A manufacturer has the following details during the month of Chaitra
2072. Calculate VAT receivable/payable.
Rs.
Opening VAT Receivable 20,000
Purchase of raw materials 200,000
Salary expenses 50,000
Reverse VAT attractive service fees 10,000
Purchase of motorcycle 150,000
Office supplies inclusive of VAT 22,600
Total sales for the month 400,000
Out of total production 80% is VAT attractive and 50% of total production is exported.
` Particulars Amount
Sales (Rs.)
Purchases
Local Purchases
Purchase of Foundation Materials 400,000
Purchase of Advertisement Materials 100,000
Purchase of Motorcycle 200,000
Purchase of Trucks 500,000
Purchase of bus for carrying its staff 600,000
Purchase of bus for Delivery Van under Hire 650,000
` Purchase of liquor and Beverage during
Promotional event 100,000
Purchase of Petrol* 300,000
Import of Goods
Import of Services
From a party not registered outside Nepal 300,000
Total Import of Services 300,000
Total Purchase 4,735,000
* 20% of petrol purchased is used for running its machinery and rest others for vehicle.
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Value Added Tax
** This includes the items purchased through Abbreviated Invoice amounting to Rs. 50,000.
Amount mentioned are exclusive of taxes unless otherwise stated.
Answer the followings;
i) Opening VAT Receivable is Rs. 500,000. The company is on credit for continuous period
for last 7 months. Can the company claim refund of VAT?
ii) Opening VAT Receivable is NIL. Calculate VAT Receivable/ (Payable).
iii) The company paid VAT payable amount as computed under (ii) above on Kartik 25, 2072.
Compute the amount to be paid as VAT, Additional Fee under Section 19(2), Interest under
Section 26 and Fine under Section 29.
44. VAT Calculation: Guras international Trade Link, a proprietorship firm is a leading exporter of
jewelry. The trade link imports the glass beads and exports the jewelry made by the glass beads. It was
registered on 15 Jestha, 2068 in Inland Revenue Department. The books of account of the trade link
shows value added tax receivable Rs. 7 million at the end of Ashad, 2071. It has not produced any
application for refund. The details of the VAT receivable of Rs. 7 million are as follows:
Rs.70,00,000.00
Further information:
The following issues are not adjusted till Ashad end, 2071.
In the month of Shrawan, 2071, the trade link found the missing invoice of Rs. 1,50,000.00 dated on
14 Shrawan 2070 during the tax auditing.
In the month of Ashad, 2069, the trade link imported goods of Rs. 20, 00,000.00 but the Custom
officer could not determine the transaction value of the goods and asked the link to deposit the amount
on the declared value. The declared value of this transaction was determined on 15 Mangsir 2070.
45. VAT Calculation: XYZ Ltd. exported goods worth Rs. 15,000,000 that contained the taxable and non-
taxable goods at a ration 8:7. The company also had sales in the domestic market worth Rs. 31,625,000
that contained taxable sales of Rs. 29,625,000 and the rest is non- taxable sales. Besides, the domestic
taxable sales included Rs.14,125,000 sold through abbreviated tax invoice.
The company paid VAT on purchase of taxable Goods Rs. 30,00,000 and on taxable service Rs.
200,000. The opening input credit of VAT carried forward is Rs. 300,000.
From the above information, calculate the following:
i) Statement of taxable and non-taxable sales; and
ii) Statement of VAT receivable or payable at the end.
ii) Registration: Best Computers (P) Limited filed statements which included following:
Purchases Rs. 52 lacs
Sales Rs. 22 lacs.
Rent Rs. 84 thousands
Telephone expenses Rs 24 thousands.
The Inland Revenue Officer has served notice for not registering under VAT. Advise the company.
48. Loss of Goods: State the provisions of the Act for set off VAT for losses of goods due to fire.
49. Penalties: What are the penalties mentioned in section 29 of the act on the following infringements:
i Registration as mentioned in section 10(1) and (2) related infringement.
ii An unregistered person issuing an invoice or documents showing collection of tax.
iii On obstruction in inspection by a tax officer.
iv On infringement of the VAT act and the rules.
v To erase and edit the data in software of approved Electronic Billing System
50. Market Value: Elaborate the provisions relating the market value and its determination under VAT
Act.
51. Market Value: What is market Value as per Value Added Tax 2053? Mention the relevant provision
applicable to market Value as per Value Added Tax 2053?
52. Assessment: Can tax officer assess the tax under Value Added Tax 2058? List out the situations under
which the tax officer may assess the tax.
53. Recovery of VAT Dues: With the VAT Return Poush end 2073, XYZ Securities service Pvt. Ltd.,
VAT due is NPR 12 crore. IRD has information several times (previous months return) to pay the Vat
due in time but the management of the company didn‘t pay any amount until the months of Falgun end,
which is increased by NPR. 4 Corer with return of Magh end 2073. On the 1st Chaitra 2073 IRD request
to Nepal Rastra Bank to hold the Bank account of XYZ Securities service Pvt. Ltd. for three months
and NRB issued letter to Delta Bank to hold Bank account for three months with request of IRD. Can
IRD hold the bank account of XYZ Securities service Pvt. Ltd., due to nonpayment of Vat in timely?
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Value Added Tax
54. Assessment: What are the powers given to the tax officer under sec 23(2) of VAT Act for the purpose
of making an assessment under sec. 18 and sec. 20?
55. Appeal on Disallowed of VAT: Mr. Kamal, a registered dealer, had purchased Rs. 500,000 worth of
materials from M/s Eastwood Private Limited, a registered dealer through a VAT bill. During VAT
audit, the tax officer says that Eastwood Private Limited has not deposited the VAT amount collected
on the bill and hence credit for Rs. 65,000 VAT paid on that purchase cannot be given. Explain the
course of action to be taken by Mr. Kamal and his obligations under the VAT Act.
56. Write short notes on the following considering the provisions of Value Added Tax Act.
a) VAT credit in case of purchase under finance lease.
b) VAT assessment in doubtful conditions.
57. Books and records: What are the types of accounts and records to be kept by a taxpayer under VAT
Act, 2052? What are their contents?
58. Books and records: What are the records to be maintained by registered dealer dealing in used or
second hand materials?
59. Debit and Credit Note: Discuss the provision of Debit and Credit Note in VAT Rules.