2080/81: Indirect Tax Dossier

1. Major Changes
The Finance Act, 2080 (2023) has made changes in indirect taxes. Rates of taxes and duties
have been changed. While some of the items have been brought within the applicability of
value added tax, excise and customs some of the items have been removed from these list.
The Finance Act has increased rate of education tax from 2% to 3% and introduced luxury tax
on selected services and goods, foreign tourism and foreign employment services. Rates of
taxes are given in the last section and some of the major changes/announcements are
outlined below.

1.2 Value Added Tax

1.2.1 Reverse VAT applicable to transport cost
Any person availing transportation services from service provider not registered in VAT has
been made liable to collect VAT on the service. The amount is to be collected at the time of
service or payment whichever is earlier (Section 42(1) of Finance Act).

1.2.2 Cash payment incentive limited to specified goods and services

Cash incentive of 10% of VAT for payment through electronic medium has been limited to
goods and services notified by the department (Section 42(4) of Finance Act).

1.2.3 Fine imposed on excess tax refund

If any taxpayer takes excess refund through automated system, the taxpayer shall be fined
25% of tax (Section 42(6) of Finance Act).

1.3 Liquor Act

The Finance Act has brought export of liquor within the scope of Liquor Act (Section 41 of
Finance Act).

1.4 Deposit required for purchase of goods for bonded warehouse

Deposit equal to excise duty shall be required for purchase of goods to be sold in bonded
warehouse (Section 43(2) of Finance Act).

2. Waiver of Tax, Fine and Penalty

2.1 Value Added Tax

2.1.1 Waiver if specified percent of tax is deposited within specified period
Following taxpayers have been given option to deposit specified percent of tax for the
specified period within specified period to avail facility of waiver of value added tax, fine and
penalty.

Nature of Business Period Tax to be deposited Deadline

Eye Hospital 2076 Shrawan 1 to 5% of transaction 2080 Ashwin End
(Section 31 of 2080 Jestha 14
Finance Act)
Semolina (Suji) 2071 Shrawan 1 to 5% of transaction 2080 Ashwin End
(Section 32 of 2076 Jestha 14
2080/81: Indirect Tax Dossier

Finance Act)
Digital service by Upto 2080 Jestha 100% if tax 2080 Asadh 25
non-resident End
Exceeding Rs. 2
million
(Section 33 of
Finance Act)
Hire purchase 2074 Shrawan 1 to 2% of transaction 2080 Mangshir End
(Section 34 of 2078 Asadh end
Finance Act)
Transport Applicable period 5% of transaction 2080 Paush End
(Section 37 of
Finance Act)
Herbs based 2071 Shrawan 1 to 5% of transaction 2080 Paush End
industries 2080 Jestha 14
(Section 38 of
Finance Act)
The above waivers are applicable to assessed tax and cases in administrative review or
courts also.

2.1.2 Waiver to NPOs

If a NPO withdraws case from court pending in any court against assessment by the
department and request the department to close the assessment, assessed tax and interest,
penalty and additional fee shall be waived (Section 35 of Finance Act).

2.2 Waiver of Fine and Penalty on Excise Duty

2.3.1 Waiver to persons licensed under Self Disposal System
Persons licensed under Self Disposal System of Excise Duty Act, who have not filed returns
and excise duty till Chaitra 2078, if submits return and pays duty and 50% of late fee within
end of Poush, shall be waived penalty and balance of late fee.

If the person stated above has submitted return and has not paid duty can pay duty and 50%
late fee within end of Poush and avail waiver of 50% of late fee.

2.3.2 Waiver to dairy based drinks

Persons engaged in dairy based drink product, not registered in VAT, may register in VAT
and submit returns along with excise duty within Ashwin 2080. In such case penalty and late
fee shall be waived. It is applicable to the court cases against assessment also. The
industries may withdraw the case and make payment of excise duty to avail this facility
(Section 39 of Finance Act).

4. Tax Rates
Rates of indirect taxes are as given below.

Tax Description Rate

Value Added Tax On goods and services except listed
in exempt list
Export 0%
Import and Domestic sale 13%
Health Risk Tax Bidi Rs. 0.30 per number
(Section 7 of Finance Act) Cigarette & Cigar Rs. 0.60 per number
Chewable tobacco, pan masala &
gutakha Rs. 60.00 per kg

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2080/81: Indirect Tax Dossier
Education Service Fee
(Section 8 of Finance Act)
Digital Service Tax
(Section 20 of Finance Act)
Luxury Tax
(Section 21 of Finance Act)
Foreign Tour Fee
(Section 22 of Finance Act)
Foreign Employment Fee
(Section 22 of Finance Act)
3. Rebate on Indirect Taxes
3.1 Value Added Tax
3.1.1 Rebate in interest, fee and fine
Persons engaged in construction business and have VAT due for the period ending Chaitra
2079 shall be waived 50% of Interest, special fee and Penalty on payment of VAT due and
50% of interest. This rebate is available to all the persons irrespective of filer and non-filer
(Section 36 of Finance Act).
LSP Associates
Remittance for education in foreign
3%
country
Digital service provided by non-
resident to Nepalese consumers 2%
exceeding Rs. 2 million
Hotel and luxury resorts rated 5 or
more star
Imported Liquor
Ornaments made up of precious 2%
metals and stones such as gold,
diamond, pearls and gems worth
over Rs 1 million
Foreign tour package
Foreign tour of natural persons
5%
sponsored by firm or company for
business promotion
Amount received from the person
1%
going for foreign employment
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