Annex 13 explained: the counterparty schedule in your VAT return

What is Annex 13?

Annex 13 is filed with the VAT return. A return on its own has one line for sales and one for purchases. Annex 13 instead reports the period party by party. For each customer and supplier it carries:

• The party’s permanent account or VAT registration number.
• The party’s trade name, as registered.
• The type of party, for example customer or supplier.
• Opening balance at the start of the period and closing balance at the end.
• Purchases from that party, split between goods and services.
• Sales to that party, split between goods and services.

Read the columns together and you can see why the Department wants them. Say you claim to have bought ten lakh of goods from a supplier, and that supplier reports selling you nothing. The two filings disagree, and the Department can see the difference without inspecting your books. It can run the same check on filings from across the country.

Why does Annex 13 tend to hurt?

The columns in Annex 13 are simple. The trouble is that the schedule depends on data you entered earlier, for a different purpose and probably in a hurry.

Most of the problems come from three fields.

The registration number. If it was never recorded, the row cannot be matched. If it was written in a remarks field or on the back of a delivery note, it does not reach the schedule. If two digits were swapped when it was typed, the row points at another business.

The trade name. The Department matches against the registered name. Some shops are known locally by one name and registered under another. If your record uses the local name, the row looks like a business the Department does not know.

The goods and services split. This comes from the category each item or service was given when it was created. If a service was set up as goods, the schedule reports it as goods for the whole year.

Opening and closing balances can add a fourth problem. A party ledger is the running account you keep for each customer or supplier. If those ledgers are kept loosely, advances, part payments and old dues that were never cleared all show up in the balances, and you have to explain them.

How do you make Annex 13 build itself?

The aim is a schedule you can print as a report, so that nobody types it in like a form. Four habits get you there.

Capture the number at creation. Do not create a new customer or supplier record without a registration number where one exists. A walk-in buyer may have no number. That sale belongs in the abbreviated bill flow (the shorter retail bill that does not need the buyer’s details), not in a tax invoice to a named party.

Use the registered trade name. You can keep the familiar name in a display field if you like. The party record itself carries the registered name.

Categorise once, properly. In the item master, your list of items and services, goods are goods and services are services. That includes repair charges, delivery charges, installation and annual maintenance. Set the category correctly when you create the item.

Keep party ledgers current. Record each receipt and payment against the invoice it settles. Do not leave it as a loose credit on the account. The opening and closing balances will then be correct.

With these four habits, month end is a reconciliation, which means checking your figures against other records. You no longer have to enter the schedule as data.

How do you reconcile Annex 13 before you file?

Two checks are worth the half hour they take.

First, run the schedule and look for three kinds of row: one with no registration number, one with a number that is clearly wrong, and one with a name that does not match a document you hold. Fix the party record and run the schedule again.

Second, pick your three or four largest counterparties and agree the figures with them. A phone call in the last week of the month costs less than a notice three months later. The usual differences are:

• A bill issued at the very end of one Nepali month that the other side recorded in the next month.
• A credit note that one party has issued and the other has not recorded.
• An advance that one side treats as a sale.

We cover the filing itself in how to file a VAT return in Nepal every month.

Common situations and what to do

Cash sales to unregistered walk-in customers. These are not trade with a named counterparty. Keep them in the abbreviated bill flow, and let the registers carry them as a total.

A supplier who refuses to give their number. Then you cannot safely claim input VAT on that purchase, so the purchase should not be in your claim. Input VAT is the VAT you paid on purchases, which you set against the VAT you charge on sales. Raise this with the supplier before you place the next order.

Returns and adjustments. A credit note is a document that reduces or cancels an earlier invoice. Issued against the original invoice, it adjusts both the register and the party’s row. Editing the invoice does not. Where you bill electronically, you are not allowed to edit an invoice in the first place.

A party who is both customer and supplier. This is common with distributors. The schedule reports trade in both directions. That is why the party type and the separate purchase and sales columns exist.

What the software should do

A billing system should treat the counterparty schedule as a report. In Kuver Books it sits in the VAT report hub, next to the sales register, the purchase register, both return registers and a VAT summary laid out by Nepali month. It carries the registration number, trade name, party type, opening and closing balances, and the purchases and sales split between goods and services. You can export it to spreadsheet, PDF or CSV for filing. Date filters work in Bikram Sambat as well as the Gregorian calendar, so the period you report is the period the Department asks about. Registration numbers are stored on the customer and supplier records, and that is what makes the schedule reliable. The reports page shows the hub in full.

Confirm the format the Department accepts, and anything specific to your own filing history, with the IRD or your accountant before you upload.