Puspa Raj Acharya, The Himalayan Times, 8 Nov 2017
Consumers can soon rest assured that the money they pay as value added tax for goods and services is actually reaching the government coffers, as the Inland Revenue Department is introducing a new system in which the bills issued by the supplier will be stored in the central server of the department.
The new system is scheduled to be introduced from November 17 (Mangsir 1) on the occasion of National Tax Day. The government observes National Tax Day on Mangsir 1 every year.
The department is going to launch the software with both online and offline features that will be provided to the taxpayers for billing purpose, according to Kishor Jung Karki, director general of the IRD. “The system will be enforced in Kathmandu Valley in the first phase, before being gradually expanded across the country.”
Many traders in the valley are already using computerised billing system. After installing the software, each VAT bill issued by the seller of the goods and services to the consumer will be automatically stored in the central server of the IRD if they have internet access. However, the software can also be operated offline and the data can be transferred to the central server by connecting to the internet later on. But even in the offline version, the trader cannot erase the transactions data.
Shishir Kumar Dhungana, revenue secretary at the Ministry of Finance, said the roll-out of the new system will be a major milestone in billing enforcement. “The IRD will have information of every transaction and it will be able to easily track whether the taxpayers have filed VAT or not.”
The major hassle that the tax administration has been facing in properly implementing VAT is issuance of bills and onsite inspection from the tax administration in the market alone is insufficient to ensure enforcement, says Dhungana. “This is the reason that the tax administration is gearing up to maintain order in the market through use of technology and raising awareness among consumers.”
According to IRD, 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’. As per VAT rules, traders can show their VAT as credit until they have cleared (sold) the stocks of the imported goods. However, due to lack of strong mechanism to cross-check stocks of goods, many traders have not been paying their VAT dues despite clearing the stocks. Meanwhile, they will be collecting VAT from the consumer end.
The increasing number of credit filers is a threat to the VAT system, which is why the tax administration has given due priority to the billing enforcement, as per Dhungana.
‘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 10 million in services.
Only around 16 to 17 per cent of the taxpayers registered to file VAT are debit filers, that is, they file their VAT regularly, as per the department.
Though the number of taxpayers registered to pay VAT is high, non-compliance is a major challenge for proper implementation of VAT. Revenue collection under VAT, which is a major contributor to the government coffers, has been weak since the last fiscal, as the number of non-filers, zero filers and credit filers is on the rise.