Glossary
What is Output VAT and input VAT?
Output VAT is the tax a business charges its customers on sales. Input VAT is the tax it pays suppliers on purchases. The business pays the Inland Revenue Department the difference, and where input exceeds output the balance is generally carried forward.
Output VAT is the tax on your sales bills. Input VAT is the tax on your purchase bills. You collect output VAT on the IRD’s behalf and claim back input VAT. Each month you pay only the difference between them.
How it works in practice
Illustrative figures for one Nepali month at a VAT-registered electronics shop:
- Output VAT charged on taxable sales: Rs 78,000.
- Input VAT on purchase bills from registered suppliers: Rs 61,000.
- Net VAT payable with the return: Rs 17,000.
If input VAT had been Rs 85,000, the shop would hold a credit of Rs 7,000. A credit is generally carried forward against later months instead of being paid out. A refund is available only in the circumstances the VAT Act 2052 provides.
Both figures come from registers. The sales register totals the VAT on every sales invoice, less credit notes. The purchase register totals the VAT on supplier bills, less debit notes raised for purchase returns.
When input VAT cannot be claimed
- The supplier is registered for PAN only, so its bill carries no VAT to claim.
- There is no valid tax invoice showing the supplier’s registration number and the VAT as its own line. An abbreviated tax invoice or a delivery note does not support a claim.
- The purchase is not for the business, or falls in a category the VAT Act 2052 and VAT Rules 2053 disallow.
- The purchase relates to exempt sales, where the tax paid generally becomes part of the cost.
Time limits also apply to late claims. Confirm the rules for your trade with the IRD or your accountant.
Where it is reported
Both totals go on the monthly VAT return, due by the 25th of the following Nepali month, with the Annex 13 counterparty schedule alongside. The guide to filing a VAT return in Nepal walks through the month-end reconciliation step by step.
Kuver Books keeps the sales and purchase registers, both return registers and a VAT summary laid out by Nepali month, as the reports page shows.
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