Kathmandu, February 28

Though the government has exceeded the overall revenue collection target in the first seven months of this fiscal, it has missed the collection target under Value Added Tax, the major tax heading, which has dented government’s revenue collection performance.

The government was able to collect revenue worth Rs 319.15 billion, exceeding the target by Rs 20.16 billion in the review period. However, the shortfall under the major tax heading despite the surge in imports has raised eyebrows on the capacity of the tax administration to effectively enforce VAT provision in the domestic market.

“Since VAT is levied on the consumer end there has to be effective market monitoring to ensure the issuance of VAT bills on sales of goods and services and there also has to be offsite (bookkeeping) monitoring due to lack of which it has been hurting the government’s revenue,” a high-level source at the Revenue Division of Ministry of Finance said. “We have instructed the revenue administration to effectively enforce VAT provision and plug all the loopholes.”

“VAT is considered to be the backbone of the revenue system but the revenue administration has yet to effectively implement it and avoid all the possible frauds like the VAT scam of fiscal 2011-12,” said Rajan Khanal, revenue secretary at the Ministry of Finance (MoF).

The review meeting of revenue collection of the first seven months in the presence of Deputy Prime Minister and Finance Minister Krishna Bahadur Mahara, today, instructed the Inland Revenue Department (IRD) — the body responsible for enforcing VAT — to scrutinise the ways in which businesses have been evading the tax.

The government has collected 56.4 per cent of the annual revenue collection target of Rs 565.9 billion within the first seven months. The government collected Rs 89.1 billion against the target of Rs 90.1 billion under VAT. Except under a few headings namely, VAT, education, health service tax and other tax, the government has exceeded the collection target under other headings in the review period.

Collection under income tax heading surpassed the target of Rs 64.27 billion to stand at Rs 68.47 billion. Likewise, customs tariff also exceeded target of Rs 56.56 billion to Rs 64.29 billion and excise collection surpassed the target of Rs 42.8 billion to stand at Rs 49.6 billion, according to the Revenue Division under MoF.

Collection under the health and education service tax stood at Rs 547.9 million and Rs 430 million, respectively. The government collected Rs 11.67 billion from registration fees in the review period against the target of Rs 8.43 billion. Tax collection from vehicles was worth Rs 5.4 billion against the target of Rs 5.2 billion.

However, the government missed the target under other tax heading and collected Rs 4.78 against the target of Rs 5.61 billion. Collection under non-tax was also not able to meet the target of Rs 24.89 billion but very slightly at Rs 24.82 billion.