No decision yet to levy VAT on broker commission
Kathmandu, August 30
The government is yet to decide on levying value added tax (VAT) on the commission of stock brokers. The issue has been pending since the last two months as the Inland Revenue Department (IRD) is yet to prepare a manual regarding VAT enforcement on brokers’ commission.
The Ministry of Finance (MoF) had assigned IRD to develop manual after stock brokers halted trading at Nepal Stock Exchange in protest against the government’s decision to collect VAT on the transactions of broker firms since 2012-13 in the last week of June.
The MoF had urged the IRD to sort out the issue as the Stock Brokers’ Association of Nepal (SBAN) had started a protest against government’s retrospective tax policy by halting trading activities in the country’s only trading bourse. The IRD is still indecisive about levying VAT on broker commission as stakeholders have advised the government not to levy VAT on broker commission considering it as a financial service.
“If the government levies VAT on the service provided by the broker firms then it will hurt the people involved in the capital market as the broker firms will collect VAT from their clients,” a high-level source at the Securities Board of Nepal said, adding, “However, if the government decides to levy VAT then we will have to facilitate it.”
The government has already urged the broker firms to be registered under VAT net through the fiscal budget.
Priya Raj Regmi, chairman of SBAN, has said that the broker firms have agreed to collect VAT if the government does decide to levy VAT, but they do not want any retrospective tax to be levied even for the previous fiscal. “We will register under the VAT net and collect tax only from the date when the government officially decides to levy VAT on broker commission,” said Regmi.
However, the government earlier had instructed broker firms to submit VAT since 2012-13 citing the fiscal budget has included the provision that the brokers firms must register under VAT. Meanwhile, SBAN has said that they had not collected VAT from clients as the tax administration had not issued any circular to enforce the provision in the fiscal budget.