Weak VAT realisation hits revenue collection

Kathmandu, November 30

The government has missed the revenue collection target by Rs 3.88 billion in the first quadrimester of this fiscal as the collection under value added tax remained weak in the review period.

Out of the total shortfall, the under-performance under VAT alone is Rs 1.81 billion, as per the Revenue Division under the Ministry of Finance. The government collected Rs 197.87 billion against the target of Rs 201.75 billion in the first quadrimester of this fiscal, that is, between mid-July and mid-November.

The government had managed to meet the revenue collection target in the third month of this fiscal after regular shortfalls in the first two consecutive months.

The tax administration has been facing challenges in enforcing billing in trade of goods and services.

According to the MoF, out of the 176,000 taxpayers registered under the VAT net, around 50 per cent are credit filers and around 33 per cent are ‘zero filers’. Due to lack of proper mechanism for billing enforcement, the number of credit filers has been growing. Importers can credit the VAT amount at customs point during import of goods, which needs to be debited after collecting VAT on the sale of goods, as the VAT is levied at the consumer end.

‘Zero filers’ refer to the taxpayers who are registered in VAT net but their annual transaction does not cross the VAT threshold of Rs 5 million in goods and Rs 2 million in services.

Only around 16 to 17 per cent of the taxpayers registered to file VAT are filing VAT regularly, according to the government.

The government has set an ambitious revenue collection target of Rs 730 billion in this fiscal. The collection in the first quadrimester is around 27 per cent of the annual target.

The government has missed revenue collection target under other major tax headings as well. The collection under income tax also fell short of the target by Rs 3.75 billion to stand at Rs 28.16 billion. However, officials are optimistic that income tax collection target will be met by mid-January. “We are hopeful about meeting the target of income tax collection when the first tranche of the income tax (40 per cent of the estimated income tax) is submitted by mid-January,” said Shishir Kumar Dhungana, revenue secretary under MoF.

The government has also missed the target under vehicle tax and registration fees due to slowdown in import of automobiles and land/house transactions in the review period. The vehicle tax collection missed the target by Rs 250 million to stand at Rs 4 billion, while collection under registration fees stood at Rs 2.9 billion, a shortfall of Rs 1.52 billion.

Meanwhile, excise and other taxes collection exceeded the target by Rs 2.47 billion and Rs 1.52 billion to stand at Rs 32.77 billion and Rs 5.81 billion, respectively, according to the Revenue Division. Collection under customs tariff and non-tax was below the target by 0.34 billion and .07 billion at Rs 40.86 billion and Rs 19.08 billion, respectively.

Data up to mid-November





Rs 65.53bn

Rs 63.72bn


Rs 41.20bn

Rs 40.86bn

Income tax

Rs 31.91bn

Rs 28.16bn


Rs 30.30bn

Rs 32.77bn

Health service tax

Rs 406.52m

Rs 317.64m

Education service tax

Rs 287.54m

Rs 240.31m

Registration fees

Rs 4.42bn

Rs 2.90bn

Vehicle tax

Rs 4.25bn

Rs 4bn

Other taxes

Rs 4.29bn

Rs 5.81bn


Rs 19.15bn

Rs 19.08


Rs 201.75bn

Rs 197.87bn