Government lowers VAT rebate on cellphones to 50 per cent


The government has revised value added tax (VAT) rebate provision on cell phones, which will increase the price of mobile phones moderately.

The fiscal budget of the current fiscal year reduced the VAT rebate on cell phones by 10 percentage points and cell phone importers will now get only 50 per cent of the amount that they paid as VAT while importing cellphones.

Earlier, the government used to rebate 60 per cent of the VAT amount to the traders on submission of the evidence of stock clearance to the tax authority. Importers must deposit 13 per cent of the import price as VAT at the customs point while importing phones.

Along with the import of new-generation cell phones, the country’s annual import of mobiles hover around Rs 11 billion to Rs 12 billion, according to cell phone traders.

The reduction in VAT rebate has traders worrying about additional business risks for genuine traders, who have to compete with cell phones imported through the grey channel, according to Ramesh Gupta, president of Nepal Foreign Trade Association.

Nepal Telecommunications Authority (NTA) has been preparing to make ‘Type Approval’ mandatory for cell phone importers, as per traders, that can easily track the phones imported through the grey channel. The IMEI number that is used by a GSM network can easily track the cellphones brought through the grey channels that are in use in the country.

Traders opine that the government should lower the VAT rebate gradually after the type approval system is enforced.

However, Director General of the Department of Customs Shishir Dhungana has downplayed the concerns raised by the cell phone traders. According to him, slight reduction in VAT rebate will not have a major impact on the mobile market of the country. “The government will rebate 50 per cent of the VAT amount to importers, which is still good,” said Dhungana, adding, “Moreover, the system to track the cell phones that were smuggled into the country will be enforced and all types of ill practices will be curbed.”

The government has been extending the VAT rebate facility from fiscal 2013-14 to discourage smuggling of cell phones into the country.