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Kathmandu Saturday January 20, 2001 Magh 07, 2057.
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VAT collection likely to meet target
By Bhaskar Sharma
KATHMANDU, Jan 19 - Despite existing impediments in the effective
implementation of Value Added Tax (VAT), total revenue from VAT in the first six months of
this fiscal year has crossed Rs 6.2 billion, 28 per cent higher than the amount collected
in the same period last year.
Similarly, registrants with the VAT Department, as of mid-January 2001, have
touched 20,181, almost meeting the whole year’s projection. 2,553 new registrants
came under the VAT net in the first six months of the current fiscal year.
"The total revenue projection for the current fiscal year is likely to
be met if VAT collection continues at the present rate. The increase in the number of
registrants with VAT is also impressive, almost meeting the total year’s target
within six months," said Dr Rup Khadka, VAT expert, who monitors Nepal’s VAT
project.
The VAT department had projected to bring twenty to twenty-one thousand new
registrants under the VAT net and had aimed to collect Rs 13.5 billion in revenue within
2000/2001.
VAT, operationalized over three years ago, has become one of the most
bitterly disputed issues between the government and the private sector. Though the dispute
seemed settled over the last one year with soaring VAT registration, the modern tax system
failed to make much headway in revenue collection. Even during the preceding fiscal years,
the government could realize only a modest revenue target.
Revenue collection from VAT in 1997/98, 1998/99 and 1999/2000 was Rs 7.1
billion, Rs 7.9 billion and Rs 10.4 billion respectively. Similarly, the number of
registrants in the same period had touched 4959, 9082 and 17,628 respectively.
However, despite impressive revenue collection and registration this year,
effective implementation of VAT is yet to take place. Finance Minister Mahesh Acharya in
his last budget speech announced extensive reforms in customs and income tax, along with
the issue of sales invoices up to the retailers’ level, with a view to develop VAT as
the main source of revenue.
He had proposed immediate implementation of Customs Act, which recognises the
valuation of goods imported on the basis of invoices furnished by importers. At the same
time, it also allows the government to purchase or direct the purchase of under invoiced
imported goods, after providing 5 percent profit on declared price to importers.
The major problem associated with VAT is the lack of compliance on the part
of businessmen with the billing requirements. They hardly issue bill to customers, though
it is mandatory under the VAT Act. And, if customers insisted, they would charge extra
money. Such practice has discouraged the customers to demand VAT bill. Low valuation of
imported goods at the customs is another major obstacle in the successful implementation
of VAT and is the root cause of the failure of the billing system.
"The culture of asking for bills while purchasing goods has not
developed so far despite government’s commitment and efforts. Until the bills are not
issued, VAT cannot be effective. To ensure proper billing, under-invoicing at the customs
must be checked," said Khadka.
As an ultimate measure, the government even
resorted to an awareness campaign in its latest attempt to effectively implement Value
Added Tax (VAT) recently. "The government is committed to effective implementation of
VAT. It will adopt all possible ways to ensure its success," said Dr Khadka.
VAT refunded
The VAT department has refunded Rs 365 million to its taxpayers within the
first five months of the current fiscal year. The government refunds VAT paid during
import of raw materials after goods manufactured out of it are exported. The total
refunded amount in the whole of last fiscal year was Rs 366 million. Similarly, the amount
was Rs 58.12 million in the year before, while it was zero in the first year of the
implementation of VAT. Although legal provisions allows six months time for refunding the
due amount, VAT department is trying to complete the overall process within a month, said
Dr Khadka.
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