KATHMANDU, July 14
Almost two decades after the enforcement of value added tax (VAT), turnover tax, annual transaction, Revenue Division, Ministry of Finance, small and medium enterprises (SMEs), earthquake affected districts, the government has expanded the threshold of VAT to Rs five million from Rs two million on supply of goods.
This means from next fiscal 2015-16, goods suppliers whose annual turnover doesn’t exceed Rs five million need not be registered in VAT net. In other words, they will not be obliged to keep records of their transactions. However, the budget has not changed the threshold of Rs one million for suppliers of services.
Along with this relaxation, the government has introduced turnover tax. Those who prefer bookkeeping of over Rs two million worth of annual transaction would not be liable to pay turnover tax.
“The government has expanded the threshold considering the lack of capacity of bookkeeping of small firms, but their annual transaction easily exceeds Rs two to three million,” said Laxman Aryal, joint secretary at the Revenue Division of Ministry of Finance, adding, “Those who don’t have capacity of bookkeeping should declare turnover tax based on self-assessment.”
Under the turnover tax, commission-earners will have to submit 0.5 per cent of their income, and small businesses will have to submit 1.5 per cent of their income and service suppliers will have to submit two per cent of their income. It is mandatory for goods suppliers whose turnover exceeds Rs five million and Rs one million in supply of services to be registered in the VAT net.
VAT is the major source of revenue that contributes around 30 per cent of the total tax collection. Currently, there are 141,000 taxpayers under VAT net, but 92 per cent of the VAT amount is being collected from the 30,000 taxpayers whose annual turnover is over Rs 10 million.
The fiscal budget has not made any changes on income tax slab of Rs 250,000 for individuals and Rs 300,000 for couples. Fiscal budget 2015-16, however, has exempted excise renewal tax, rent tax and income tax of small and medium enterprises (SMEs) — whose annual turnover is less than Rs two million — of the 14 earthquake affected districts.
Also, budget has introduced a mandatory provision of submitting the income statement of a person who earns more than Rs four million in a year from fiscal 2015-16.
Tax discounts and waiver
A version of this article appears in print on July 15, 2015 of The Himalayan Times.