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2068/69

Compiled & Prepared By

G. K. Agrawal & Co.

(Chartered Accountants) 4th Floor, Radha Bhawan P.O. Box No.: 858 Tripureshwor, Kathmandu Ph: +977-1-4245408 Fax: +977-1-4260525 e-mail: gopal@gkagco.com.np gkagco@gmail.com

[SYNOPSISOFNEPALBUDGET2068]
HIGHLIGHTS OF KEY TAX PROPOSALS FOR F/Y 2068-69

Synopsis of Nepal Budget 2068

Only For Private Circulation

The Fourth Budget of the Federal Democratic Republic of Nepal was presented by Honorable Finance Minister Mr. Bharat Mohan Adhikari by way of Finance Ordinance on Ashadh 31, 2068 (July 15, 2011) for the F/Y 2068/69 i.e. 2011/12. The Direct Tax provisions contained in the Finance Bill shall generally apply to F/Y ending Ashadh 31, 2069 (July 16, 2012) unless specifically stated otherwise. Further, other provisions shall be applicable w.e.f. from Ashadh 31, 2068 or Shrawan 01, 2068 as the case may be

This document is intended for private circulation for the use of our clients only to provide general outline on the topics covered. Professional Advice to be sought before acting on any information contained herein. Sincere Efforts have been made to avoid mistake or error or omission; however, G.K. Agrawal &5Co. does not assume any responsibility for errors or omissions, if any.

HIGHLIGHTS OF KEY TAX PROPOSALS FOR F/Y 2068-69 ARE GIVEN IN PAGES 3-33

Remarks: Major Amendments for F/Y 2068/69 have been shown in Bold, Italics & Highlighted Font.

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

Only For Private Circulation

A. Allocation of Budget & Availability of Resources for F/Y 2068/89


Particulars APPROPRIATION OF BUDGET: Recurrent Expenditure Capital Expenditure Loan & Share Investment Repayment of Principals TOTAL BUDGET APPROPRIATION OF BUDGET: Development Programme General Administration TOTAL BUDGET SOURCE OF FINANCING BUDGET: Revenue Repayment of Principals Foreign Grants Deficit TOTAL BUDGET SOURCE OF DEFICIT FINANCING: Foreign Loan Domestic Borrowings TOTAL DEFICIT F/Y 2068/69 Amount % 266.61 72.61 25.38 20.30 384.90 69.27% 18.86% 6.59% 5.27% 100.00% F/Y 2067/68 Amount % 190.32 129.54 18.42 338.28 56.26% 38.29% 0.00% 5.45% 100.00%

202.56 182.34 384.90

52.63% 47.37% 100.00%

178.61 159.29 337.90

52.86% 47.14% 100.00%

241.77 5.93 70.13 67.06 384.90

62.81% 1.54% 18.22% 17.42% 100.00%

216.64 65.34 55.91 337.90

64.11% 0.00% 19.34% 16.55% 100.00%

29.65 37.41 67.06

44.21% 55.79% 100.00%

22.23 33.68 55.91

39.76% 60.24% 100.00%

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

Only For Private Circulation

B. DIRECT TAXATION:
Rate of Taxation: Tax Rate for Natural Persons:
Particulars Resident Individuals - Remuneration Income: -Married (including widow & widower): Up to Rs. 200,000 -Unmarried : Up to Rs. 160,000 On Next Rs. 100,000 On Balance* * On Income in excess of Rs. 25 Lacs: Additional Tax @ 40% on Tax calculated as above. On Income in excess of Rs. 2,500,000 Resident Woman, having only Remuneration Income, shall be entitled to a Rebate of 10% on Total Tax calculated as above. Resident Individuals - Proprietorship Firm: -Married (including widow & widower): Up to Rs. 200,000 -Unmarried : Up to Rs. 160,000 On Next Rs. 100,000 On Balance (for Normal Income) # On Balance (for Export Income) # On Balance (for Income from Special Industry) # # On Income in excess of Rs. 25 Lacs: Additional Tax @ 40% on Tax calculated as above. Resident Individuals-Presumptive Tax: Natural Person having only Business Income with Annual Turnover up to Rs. 20 Lacs and Annual Income up to Rs. 2 Lacs, may choose to pay Tax as below (However, such person cannot claim medical tax credit or advance tax for TDS deposited): - In the Metropolitan or Sub Metropolitan Cities - In the Municipalities - In the rest of Nepal Owner of Public Vehicles (Per Vehicle Per Annum): - Minibus / Mini Truck / Truck / Bus - Car / Jeep / Van / Micro Bus - 3 Wheeler / Auto Rickshaw / Tempo - Tractor / Power Tiller Gain from Disposal of Non Business Chargeable Assets: [After taking into consideration exemption limit (i.e. Rs. 160,000 for individual and Rs. 200,000 for couples]: - From Disposal of Land & Building for Rs. 3,000,000 or more (owned for 5 Years or more) - From Disposal of Land & Building for Rs. 3,000,000 or more, (owned for less than 5 Years) - From Disposal of Listed Securities
4 G. K. Agrawal & Co. (Chartered Accountants)

Tax Rate 2068/69 2067/68 1% ^ 1% ^ 15% 25% 1% ^ 1% ^ 15% 25%

35%

35%

Nil Nil 15% 25% 15% 20%

Nil Nil 15% 25% 15% 20%

Rs. 3,500 Rs. 2,000 Rs. 1,250 Rs. 1,500 Rs. 1,200 Rs. 850 Rs. 750

Rs. 3,500 Rs. 2,000 Rs. 1,250 Rs. 1,500 Rs. 1,200 Rs. 850 Rs. 750

2.50 % 5% 5%

5% 10 % 10 %

Synopsis of Nepal Budget 2068 Particulars

Only For Private Circulation Tax Rate 2068/69 2067/68 10 % 25% 10 % 25%

- From Disposal of Other Non Business Chargeable Assets (including Non


Listed Securities)

Non Resident Individuals: on any Amount

^ 1% Tax on Remuneration Income needs to be deposited in separate Revenue Account in IRO designated as Social Security Fund. Note: Husband and Wife, having separate income source, are given option either to get assessed separately as individual or jointly as couple. Gain from disposal of Personal Building, if the building is owned for more than 10 Years and occupied by the owner for more than 10 Years, is exempted from income tax. Gain from disposal of Land, Building or Personal Building for a price below Rs. 30 Lacs, is exempted from income tax.

Further Deductions / Facilities for Resident Natural Persons: Resident Disabled/Incapacitated Individual shall get an additional 50% of Exemption Limit (i.e. 50% of Rs. 200,000 in case of couple & 50% of Rs. 160,000 in case of single). Individual having Life Insurance Policy shall get an additional exemption from the Taxable Income to the extent of Rs. 20,000 or Premium Amount, whichever is lower. Annual Remote Area Allowance up to Rs. 50,000 (depending upon Remote Area Category) is exempted from tax. Employees working in Nepalese Diplomatic Mission abroad are allowed 75% exemption on Foreign Allowances. Contribution in Approved Retirement Fund is deductible to the limit of 1/3 of Assessable Income or Rs. 300,000 whichever is lower. Tax Credit for Resident Natural Persons: In case of Approved Medical Expenses, Medical Tax Credit for Rs.750 or 15% of Approved Medical Expenses or Actual Approved Medical Expenses incurred whichever is lower is available to resident natural persons as deduction from tax liabilities. Unutilized Expenses, if any, can be carried forward to Next Financial Year. Where Foreign Income is included in Taxable Income of a Resident Natural Person, Foreign Tax paid in Foreign Country can be (at the option of the Tax Payer): i. Deducted as Expense or ii. Tax Liability in Nepal be reduced by such tax paid up to the Average Rate of Tax applicable in Nepal.
rd

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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Tax Rates for Entities:


Particulars Bank, Finance Company, General Insurance Company, Petroleum Entities; Cigarette, Tobacco, Beer and Alcohol Company Special Industries & IT Industries Entities engaged in construction & operation of Road, Bridge, Tunnel, Ropeway (including Cable Car), Trolley Bus and Tram. Co-operative Institution registered under Co-operative Act, 2048 (other than cooperatives dealing in Exempted Transaction) Entity wholly engaged in the (BOOT) projects conducted so as to build public infrastructure, own, operate and transfer it to the Nepal Government & in power generation, transmission, or distribution. Private Ltd. Co. / Limited Co. / Partnership Firm not specifically mentioned above All Export Entities Non-resident person Providing Shipping, Air Transport or Telecommunications Services in Nepal Repatriation of income of a Foreign Permanent Establishment of a Non-Resident situated in Nepal. Non Resident Airline Services having office in and business in Nepal but not operating flights to and within Nepal Agriculture Income other than those derived by any firm, partnership or company. Trust of Dead or Incapacitated Person shall be taxed as natural Person Tax Rate 2068/69 2067/68 30% 20% 20% 20% 20% 25%. 20% 5% 5% 2% Nil 30% 20% 20% 20% 20% 25%. 20% 5% 5% 2% Nil

Tax Concession and Rebates for Entities:


Particulars Profit on Export Income of a Manufacturing Industry Special Industries & I.T. Industries providing direct employment to 300 or more Nepalese Nationals throughout the year. Special Industries providing direct employment to 1200 or more Nepalese Nationals throughout the year. Special Industries providing direct employment to 100 Nepalese nationals of which, 33% are women, dalits (the downtrodden) or the handicapped, throughout the year. Special Industries operating in Highly Undeveloped Area. Tax Rate 2068/69 25% Rebate on Applicable Tax 90% of Applicable Tax 80% of Applicable Tax 80% of Applicable Tax 10% of Applicable Tax for 10 Yrs from the year of operation 20% of Applicable Tax for 10 Yrs from the year of operation 2067/68 25% Rebate on Applicable Tax 90% of Applicable Tax 80% of Applicable Tax 80% of Applicable Tax 10% of Applicable Tax for 10 Yrs from the year of operation 20% of Applicable Tax for 10 Yrs from the year of operation

Special Industries operating in Undeveloped Area.

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068 Particulars

Only For Private Circulation Tax Rate 2068/69

2067/68 30% of Applicable 30% of Applicable Tax for 10 Yrs Tax for 10 Yrs from from the year of the year of operation operation Industries established in Special Economic Zone (SEZ) of A Rebate of 100% A Rebate of 100% Himalayan Districts and other prescribed Hilly District. for 10 Years & 50 % for 10 Years & 50 thereafter on % thereafter on Applicable Tax Applicable Tax Industries established in Special Economic Zone (SEZ) of Other A Rebate of 100% A Rebate of 100% Areas. for 5 Years & 50 % for 5 Years & 50 % thereafter on thereafter on Applicable Tax Applicable Tax Dividend distributed by Industries established in Special A Rebate of 100% A Rebate of 100% for first 5 Years & for first 5 Years & Economic Zone (SEZ). Special Industries operating in Under-Developed Area.
50% for next 3 Years on Dividend Tax 50% for next 3 Years on Dividend Tax

Income from Foreign Technology, Management Fee and A Rebate of 50% on Royalty earned by Foreign Investors from industries established Applicable Tax in Special Economic Zone (SEZ) Industry related to Software Development, Data Processing, A Rebate of 50% on Cyber Cafe, Digital Mapping established at prescribed Applicable Tax Technology Park, Biotech Park & Information Technology Park. Entity licensed to generate, transmit and distribute electricity, if starts construction by Bhadra 07, 2071 & commercially starts generation, generation & distribution, distribution of A Rebate of 100% hydropower by end of Chaitra 2075. for first 10 Years & The facility is available also for Solar, Bio-gas and Wind 50 % for next 5 Energy. Years on Applicable [However, entities already having started commercial Tax production of electricity before Shrawan 01, 2068 shall be eligible for facility as prevalent at the time of obtaining license.] Entity licensed to generate, transmit and distribute electricity, if commercially starts generation, generation & distribution, A Rebate of 100% distribution of hydropower by end of Chaitra 2075. for first 7 Years & The facility is available also for Solar, Bio-gas and Wind 50 % for next 3 Energy. Years on Applicable [However, entities already having started commercial production Tax of electricity before Shrawan 01, 2068 shall be eligible for facility as prevalent at the time of obtaining license.] Person engaged in Research & Extraction of Petroleum and A Rebate of 100% Natural Gas, if commercially starts the transaction within for first 7 Years & Chaitra End 2075. 50 % for next 3 Years on Applicable Tax 40% Rebate on Income from Construction and Operation of Roads, Bridges, Airports, Applicable Tax Tunnels or Investment & Operation of Tram, Trolley Bus
7 G. K. Agrawal & Co. (Chartered Accountants)

A Rebate of 50% on Applicable Tax A Rebate of 50% on Applicable Tax

A Rebate of 100% for first 7 Years & 50 % for next 3 Years on Applicable Tax

A Rebate of 100% for first 7 Years & 50 % for next 3 Years on Applicable Tax A Rebate of 100% for first 7 Years & 50 % for next 3 Years on Applicable Tax 40% Rebate on Applicable Tax

Synopsis of Nepal Budget 2068 Particulars

Only For Private Circulation Tax Rate 2068/69 2067/68 10% Rebate on Applicable Tax 40% Rebate on Applicable Tax for 10 Years from operation date. 50% Rebate on Applicable Tax 25% Rebate on Applicable Tax N.A. 100% Tax Exemption 10% Rebate on Applicable Tax 40% Rebate on Applicable Tax for 10 Years from operation date. 50% Rebate on Applicable Tax 25% Rebate on Applicable Tax N.A. 100% Tax Exemption

Listed entity engaged in Manufacturing, Tourism, Hydropower generation, distribution & transmission and specified Industry established in special economic Zone u/s 11 (3C) Industries manufacturing Brandy, Wine, Cider from fruits in very Undeveloped Area

Income from Sale of Intellectual Property Royalty Income from the Export of Intellectual Property Industries established in Remote Areas Income of Specified operation of Co-operative Society established in Remote Area under Co-operative Act, 2048 Note:

In case a person is eligible for above tax concession / rebate under more than one category; it shall have the option to choose only one type of tax concession / rebate.

TDS (Tax Deduction at Source):


Payments that attract TDS: TDS on following payments needs to be deducted at below given rates: TDS Rate Particulars F/Y 2068/69 Earlier
Remuneration (Sec.87) Investment Returns & Service Fees (Sec.88): -Natural Resource Payment -Rent to Individuals -Rent to Others -Royalty -Gain from Investment (Life) Insurance -Gains from Unapproved Retirement Fund -Service Fees -Service Fee paid to Service Oriented Resident registered under VAT -Meeting Allowances -Commission -Commission paid by Resident Companies to Non Residents -Bonus on Sales -Aircraft Lease Payment -Lump Sum Retirement Payment from Approved Fund & Nepal Government under Sec 65(1b) [in excess of 50% of payment to an individual or Rs.500,000 whichever is higher) Teaching on Period Basis 8 G. K. Agrawal & Co. (Chartered Accountants)
Normal Rate of Individual (deductible on Equal Monthly Basis) Normal Rate of Individual (deductible on Equal Monthly Basis)

15% 10% * 10% 15% 5% * 5% * 15% 1.50% 15% * 15% 5% 15% 10% 5% * 15% *

15% 10% * 10% 15% 5% * 5% * 15% 1.50% 15% * 15% 5% 15% 10% 5% * 15% *

Synopsis of Nepal Budget 2068 Particulars


Dividends: -Distributed by Resident Companies -Distributed by Partnership Firms -Distributed by Resident Entity (other than Companies & Partnership Firms) Interest: -On Deposits / Debentures from Resident Bank, Finance Companies or listed companies and on Govt. Bonds to Individuals not related to business. -To Others (not stated above) # Contract Payments above Rs. 50,000 Contract Payments to Non- Residents: - Contracts related to Air Craft Repair - Other Contracts -General Insurance Premium paid to Non-Resident Co. -General Insurance Premium paid to Resident Co.
#

Only For Private Circulation TDS Rate F/Y 2068/69 Earlier


5% * 5% * 5% * -

5% * 15% 1.50% 5% 5% 1.50% Rate as prescribed by IRD (otherwise, as per above) * 25%* 10%

5% * 15% 1.50% 5% 5% 1.50% Rate as prescribed by IRD (otherwise, as per above) * 25%* 10%

-Payment to non-resident person under a contract


Others Wind Fall Gain (Prizes, lotteries, or any other casual income either in cash or in kind) Gain from Commodities Future Market Transactions Gain from Disposal of Listed Securities (to be deducted by Nepal Stock Exchange) -To Resident Individuals -To Others (not applicable to Resident entity established under prevalent laws for dealing in purchase/sale of securities) Gain from Disposal of Non- Listed Securities (to be deducted by respective companies) -To Resident Individuals -To Others (not applicable to Resident entity established under prevalent laws for dealing in purchase/sale of securities) Capital Gain from Disposal of Land and Building exceeding Rs. 3 Million (to be deducted by respective Malpot Office at the time of Registration) in case of Natural Persons: - Owned for a period below 5 Years - Owned for 5 Years or more
(In case of Personal Building, if the building is owned for more than 10 Years and occupied by the owner for more than 10 Years, then the Capital Gain Tax shall not be applicable) * Denotes Final Tax Payment.

5% 10%

10% 15%

10% 15%

10% 15%

5% 2.50%

10% 5%

Notes:
Rs. 50,000 referred to in Sec. 89 shall be determined by aggregating a payment under a contract with any other payment made by the person or an associate of the person during the previous 10 days under the same contract to the same payee or an associate of the payee.
9 G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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Contract has been defined as agreement entered into for supply of goods or labour or construction/erection/establishment of tangible assets or structure or any work prescribed as contract by the Inland Revenue Department.
Payment for Services to Non-Resident shall attract TDS @ 1.50 % for VAT Registered Party & 15% for Non VAT Registered Party.

Payments that do not attract TDS:


Payment of remuneration to the writer of the articles published in Newspaper & Magazines. Payment of remuneration for preparation of question paper or checking of answer sheet Interregional interchange charges paid to a bank issuing Credit Cards. Payment by individual other than payment in course of business and payment of rental for hire of house, land & goods / equipment attached to such house / land. Interest or fee paid by Nepal Govt., under an agreement, to Foreign Govt. or an international organization (to which Nepal is a party). Payment of interest to a resident bank or other resident financial institution. Payments to Tax-exempted entities. General Insurance Premium paid to Resident Companies. Payment of Dividend by entities other than Company. Payment of Annual interest up to Rs. 10,000 in the amount deposited to the Micro Credit Institutions, Rural Development Banks, Postal Saving Bank, and Co-operatives in the rural area.

TDS Deposit & TDS Return Submission:


TDS amount should be deposited within 25 Days from the Nepalese Month End in which such TDS is deducted. For non deposit of TDS amount, Interest @ 15% of TDS amount per annum shall be levied. TDS Return should be submitted within 25 Days from the Nepalese Month End in which such TDS is deducted. For non submission of TDS Return, Fee @ 1.50% of TDS amount per annum shall be levied.

Advance Income Tax:


Income Tax for F/Y should be paid in 3 installments as follows:
Instalment First Second Third Time Period Up to Mid-January (Poush end) Up to Mid- April (Chaitra end) Up to Mid-July (Ashadh end) Amount 40% 70% 100%

Where an instalment of tax paid by a person is less than 90% of Tax Payable, interest shall be levied @ 15% for each month and part of month from the date of first installment on the amount to the excess of 90% of the instalment that would have paid over the installment paid. The presumptive tax-payers need not require paying any advance tax as above. Further if the Tax Amount for the F/Y is less than Rs 5000, installment is not required to be paid. For failure to pay Tax; Interest at 15% per annum shall be levied for the period of failure to pay tax, considering part of a month as a complete month.

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G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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Filing Annual Income Tax Returns


Annual Income Tax Return should be filed within 3 months from the end of an Income Year i.e. Ashwin end (i.e. Mid October). However, a taxpayer may have the due date extended [Maximum Allowed extension: a period of 3 months i.e. up to Poush end (Mid January)] upon filing an application with the respective IRO with bona-fide reasons for such extension. The decision for extension (whether or not to grant extension & period for which to grant extension) rests exclusively with the IRO.

General Rate of Interest levied by IRD:

General Rate of Interest levied by the IRD to the assesses continues to be 15%.

Deduction for General Insurance Business:


Following Expenses continues to be allowable as deductible expenses for General Insurance Business:
i. ii. 50 % of Net Insurance Premium provided for Unexpired Risk & 115 % of outstanding claim at year end as per Insurance Act/Rules.

However, amount deducted as expenses above in a year should be included in the Income of next year for calculating such business income or loss for next year.

Set Off /Carry Forward of Loss:


Loss from Business of a person in a year can be set off against any other Business Income & Investment Income of that year. Loss from Business can be carried forward up to 7 years for set off against Business Income and Investment Income. Loss from Investment of a person in a year can be set off against any other Investment Income of that year. Loss from Investment Income can be carried forward up to 7 years for set off against Investment Income. Carry Forward of Loss can be made up to 12 years in case of Projects building, operating & transferring public infrastructure to the Nepal Government, Projects building Electricity Production House, generating & transmitting electricity and entities dealing in petroleum products under Nepal Petroleum Act, 2040. Loss incurred in business or investment where assesses enjoys full tax exemption cannot be carried forward.

Penalty for Non-Filing of Income Tax Return on Time:


Non-Filing of Estimated Income Tax Return Income u/s 95 within due date shall attract penalty of Rs. 2000 per Return. Non-Filing of Income Tax Return Income u/s 96 within due date shall attract penalty of @ 0.10% of Annual Turnover (including all incomes) or Rs. 100 per month whichever is higher.

Income Source Not To Be Sought For:


Income Source shall not be sought for manufacturing industries (other than cigarette, liquor & beer industries) using more than 50% indigenous raw materials, employing more than 300 national workers or those of national importance such as hydro electricity projects, international airports, tunnel ways, road ways or railways until Chaitra end, 2075.
11 G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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Sundries:
Compensation received by a resident natural person on account of physical injuries due to personal accident shall not be included in his income; likewise, Medical Expenses incurred in the treatment for such accident cannot be claimed for Tax Adjustment.

Payments above Rs. 50,000:


Payment above Rs. 50,000 through Account Payee Cheque (instead of Bearer Cheque) has been made mandatory for eligibility of deduction of expenses (for persons having annual turnover in excess of Rs. 20 Lacs). Further elaboration in this regard: A person having annual turnover for an income-year in excess of Rs 20 Lacs shall not be allowed a deduction for a Cash Payment in excess of Rs 50,000 incurred other than in the following conditions by the person during the year: Payment is made to Nepal Government, a constitutional body, a corporation owned by Nepal Government, or a bank or financial institution; Payment is made to a farmer or a producer producing primary agricultural products even in the case where the product is primarily processed by the farmer himself; Payment is a retirement contribution or retirement payment; Payment is made in an area where banking services are not available; Payment is must necessarily be made in cash or on a day when banking services are closed; or Payment is made into a bank account of the payee. Cash Payment means a payment other than made through a bank or financial institution by way of letter of credit, Account Payee Cheque, Draft, Money Order, Telegraphic Transfer, Money Transfer (Hundi), and any other form of transfer made between two banks or financial institutions.

Tax Payment in Installment:


Before an assessee is sued on account of non-payment of income tax; if the assessee requests in writing for payment in installment; the tax officer may permit payment in installment over a reasonable period of time. In case of non-payment of income tax within extended time as stipulated above; additional interest @ 5% per annum shall be levied on the remainder tax amount.

12

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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Special Provisions related to Merger of Banks & Financial Institutions and between Insurance Companies (Sec. 47 A) - Change in Control Provision of Sec. 57 shall not apply. - Loss till the date of Merger can be carried forward and set off in pro-rata basis in next 7 years post Merger (However, in case of demerger later on, Tax on such Set Off amount has to be repaid) - 50% Reduction in applicable tax rate to employees for lump sum payment (other than Retirement Fund Payments & Payments mentioned in the Employees Service Contract in case of group retirement of employees due to merger. - No Capital Gain Tax shall be levied on disposal of shares by shareholders of merged entity till 2 years from the date of merger. - No tax on dividend till two years which is paid to shareholders of the time of merger. - Notification to IRD should be given within Kartik end, 2069 and merger should be done within Kartik end, 2070 for the purpose of this section.

Additional Deductions - Manufacturing Industries may deduct 50% of capital amount for Power Generating Assets in the year of acquisition as Additional Depreciation. - Capital Expenditure incurred for purchasing Fiscal Printer and Cash Machine can be claimed as depreciation in the year of purchase.

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G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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C. INDIRECT TAXATION:
C.1 Value Added Tax (VAT): Rate of VAT:
Rate of VAT continues to be 13%.

Threshold for Mandatory VAT Registration:


Compulsory VAT registration for a person importing taxable items exceeding the value of Rs 10,000 at a time for commercial purpose. Turnover in excess of 20 Lacs (dealing in goods) during preceding last 12 months. Turnover in excess of 10 Lacs (dealing in Services) during preceding last 12 months. Turnover in excess of 10 Lacs (dealing in goods as well as Services) during preceding last 12 months.

Mandatory VAT Registration for Operation of Business of Certain Goods in Stipulated Area:
Mandatory VAT Registration for Educational Consultancy, Discotheque, Health Club, Catering, Party Palace Business, Parking Service, Mechanically operated Dry Cleaning Service and Restaurant with Bar operating in Municipality Areas and other areas specified by Inland Revenue Department within 30 days from operation of such business. Taxpayers operating Motor-parts Business, Hardware, Sanitary Fittings, Furniture, Fixtures, Furnishing, Automobiles, Electronics, Marbles, Colour-Lab Business in Metropolitan, SubMetropolitan, Municipality, or area specified by the IRD have to be registered under VAT within 30 days from operation of such business.

Continuation of Inclusion in the List of VAT Exemption Goods/Services:


Cargo Service for the purpose of Export. Reinsurance Service. Storage Service for Agriculture Products provided by Cold Storage. Machinery Equipment required for Bee-Keeping viz. Metal Barrel, Bee Brush, Gear Pump, Wheel Plate etc. (under H.S. Code 84.36) & Honey Filter & Juice Filter Machine (under H.S. Code 84.33). Machinery Equipment & Chemical for Blood Transfusion to be imported by Nepal Red Cross Society. Machinery Equipment used for the purpose of Research & Development in Pharmaceutical Industries & Hospital (under H.S. Code 90.18 & 90.27) upon recommendation of Department of Drug Administration.

New Exclusion from the List of VAT Exemption Goods:


Hotel, Guest House Facility provided by Apartment on a commercial manner.

New Inclusion in the List of VAT Exemption Goods:


Spare parts imported by Jute industries (on the recommendation of the Department of Industries). Jute Batching Oil (H.S. Code 27.10.19.13) & Jute Products (H.S. Code 53.06, 53.07 & 53.10) continues to remain under VAT Exemption List.
14 G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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Continuity to Exclusion from the List of VAT Exemption Goods/Services availed by Finance Act, 2066 - Few Instances:
Kerosene Oil. Business/Professional Training & Refreshment Training Courses provided by entities other than Nepal Government

Continuity to VAT Exemption availed by Finance Act, 2066 on Goods/Services - Few Instances:
Scooter used by handicapped people. Raw Material for Feed Supplement under H.C. 23, 28 & 29. Limestone Powder under H.C. 25. Raw Materials & Packing Materials for manufacture of IOL (Intra Ocular Lens) Gear Box of aero plane and helicopter. All Hydro Power Projects. Prescribed Goods to be imported in the name of Head Office of Nepal Army, Armed Police Force and Janpath Police under recommendation of respective ministries.

Continuity to Exclusion of VAT Exemption availed by Finance Act, 2065 on following Goods/Services - Few Instances:
Certified Orthodox Tea from Organic Fertilizer. Batteries for Battery-operated-tempo. Solar Photo-voltic Flat Plate used for Bio-gas, solar power and

VAT Refund Facility to Sugar Industry:


70% Refund of VAT collected on sale of own manufactured sugar by Domestic Sugar Industry, if sold to VAT Registered Person shall be refunded as prescribed by IRD.

VAT Refund Facility Continued to Mustard Oil & Vegetable Ghee & Oil Industry:
50% Refund of VAT collected on sale of own manufactured Mustard Oil by Domestic Mustard Oil Industry and 50% Refund of VAT collected on sale of locally manufactured vegetable Ghee by Domestic Ghee Industry & other Refined Edible Oil Industry, if sold to VAT Registered Person shall be refunded as prescribed by IRD. However such refund facility is not availed to Packaging Industries engaged in import of Refined Oil in bulk quantity and selling it by refilling in consumer package.

VAT Refund Facility continued on Certain Goods:


Vat Refund Facility (VAT collected on Sales less Vat paid on Purchase) continues to be availed to Textile, Wooden Match and Tyre-Tube Industries. 25% Vat Refund Facility [i.e. 25% of (VAT collected on Sales less Vat paid on Purchase)] continues to be refundable to Maida Industry on sale of Maida. 60% Vat Refund on VAT paid on purchase of Raw Materials of Cellular Mobile or Finished Goods continues to be refundable to Domestic Manufacturer or importer of Cellular Mobile, upon submission of evidence of sale of such items to VAT Registered Person (Earlier, sale to any person whether VAT Registered or not, was permissible).

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G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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Bank Guarantee:
Industries having an export over 60% of Total Sales during last 12 months, may import Raw Material to the extent of manufacture of export quantity against Bank Guarantee of VAT Amount at related custom point. 10% Value Addition in Raw Materials continues to be required on such exports. Likewise, import for Duty Free Shops through Bonded Warehouse can be done against Bank Guarantee of VAT Amount at related custom point. Such Bank Guarantee shall be released from the related custom point.

VAT Facility to Hydropower Projects


VAT Exemption Machinery, Tools, Equipment and Spare parts, Penstock Pipe or Iron Plate used to make Penstock Pipe (not manufactured in Nepal) to be imported by Hydropower Projects, on recommendation of Alternative Energy Promotion Centre / Electricity Development Department. Zero Rate of VAT Zero Rate Facility shall be provided to Machinery, Tools, Equipment and Spare parts, Penstock Pipe or Iron Plate used to make Penstock Pipe manufactured in Nepal, to be directly sold to Hydropower Projects, on recommendation of Alternative Energy Promotion Centre / Electricity Development Department.

VAT Refund for Scooter imported/purchased by Handicapped Person:


Refund of VAT paid by the importer on the scooter used by handicapped person at the time of the registration of such vehicle in his name at Transport Management Office on the recommendation of the Ministry of Women, Child & Social Welfare or Chief District Officer.

Limit of Monthly Export for VAT Refund:


Person / Entity exporting more than 40 % of their monthly sale Export shall be availed Lump sum VAT Refund within 30 days from application date.

Time Bar for VAT Refund:


Application for VAT Refund u/s 24 should be made within 3 Years from the date of end of Tax Period in which the VAT was refundable; otherwise, the same shall not be refunded.

Compulsory Collection of VAT on Construction for Commercial Purposes exceeding Rs. 5 Million:
Compulsory collection of VAT on the construction of buildings, apartments or shopping complexes (or such structures, as prescribed by the IRD) for commercial purposes exceeding the value of Rs. 5 million, from the owners (though such construction be done by Non-registered person).

VAT Collection by Local Authority or International Agencies in Nepal:


VAT to be collected by Local Authority or International Agencies in Nepal, on sale of Taxable Goods and Services

16

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

Only For Private Circulation

VAT Collection on Services Acquired from Person Outside Nepal Not Registered in Nepal:
While acquiring services from person outside Nepal not registered in Nepal, VAT on such services shall be determined and collected by the Service Recipient (whether registered in VAT or not).

VAT Refund Facility for Manufacturers (not having Bonded Warehouse or Pass Book facility):
Manufacturers (not having Bonded Warehouse or Pass Book facility) shall continue to get refund of VAT at Flat Rate at custom point against export of finished goods; 10% Value
Addition in Raw Materials continues to be required on such exports.

Time Bar for Tax Assessment:


Tax Assessment may be done within 4 Years from the date of submission of VAT Return; otherwise, the returned submitted shall be deemed as assessed. However, in case of tax evasion be means of false records, invoices or documents or other fraud, the department may order for Re-assessment at any point of time; no time bar shall be applicable in the case.

Temporary VAT Registration:


Temporary VAT Registration needs to be obtained by the organizer of Temporary Exhibition, fare etc. and traders (not registered under VAT) transacting in taxable goods and services in such exhibitions. Within 7 days from the date of end of such exhibition, return needs to be filed tax needs to be paid.

Self Attested Purchase & Sales Register for Non-Vat Registered Parties:
Non-Vat Registered persons dealing in Taxable goods and services should maintain Purchase and Sales Register duly self-attested. Fine of Rs. 1,000 shall be levied for each contravention.

Sale to Industries Operating In SEZ:


Sale of Raw Materials and Finished Goods to industries operating in SEZ, established under prevalent law, shall be taxed at Zero (0) %.

Sundries:
Rate of Interest continues to be 15% for delay in payment of VAT. The practice of Advance Ruling is available for clarification of any VAT matters. A person who knowingly or recklessly aids or abets another person to commit an offence or counsels or induces another person to commit such an offence shall be liable for a penalty equal to 50% of the underpayment of tax.

17

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

Only For Private Circulation

Special Provision relating to Computerized Billing A Fine of Rs. 5 Lacs shall be levied if Tax Payer is found using software having elimination & modification option. Special Provision relating to Voluntary VAT Registration for Health Institutions Health institutions liable to collect and pay Health Service Tax may opt to collect and pay value added tax instead by voluntarily registering with the Value Added Tax. Such institutions shall not collect Health Service Tax. Such institutions shall collect VAT for 5 Years from the date of Registration.

Remarks:
For Exhaustive List of VAT Exempted Goods and Zero Rated Goods, please refer to Revised Schedule 1 & Schedule 2 of Vat Act, 2052 given in Finance Ordinance, 2068.

18

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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C.2 Excise Duty: Levy of Excise Duty:


For goods under Physical Control System: At the time of removal of goods for sale. For goods/services under Self Removal System: At the time of sale. For goods imported: At the time of import. For service imported: As prescribed by the IRD.

Time of Payment of Excise Duty:


For goods under Physical Control System: At the time of removal of goods for sale. For goods/services under Self Removal System: within 25 Days from the month-end in which the invoices have been issued. For goods imported: At the time of import. For service imported: As prescribed by the IRD.

Onus of Payment of Excise Duty:


For goods under Physical Control System: Manufacturer. For goods/services under Self Removal System: Manufacturer of goods/services. For goods imported: Importer. For service imported: Importer.

Time of Submission of Return:


Time for submission of Monthly Excise Return continues to be 25th of next month.

Exemption of Excise Duty:


Excisable goods/services exported out of Nepal or sold through Bonded Warehouse or Duty Free Shop continues to be exempted from excise duty (except liquor & cigarettes). Provision for Cash Deposit / Bank Guarantee before export or sale through Bonded warehouse or Duty Free Shop continues to be abolished.

Duty Free Sale of Cigarettes & Liquor:


Duty free sale of cigarettes and liquor continues to be prohibited. However, exemption of excise continues for purchase of cigarettes and liquor from the authorized bonded warehouses by the persons/entities having diplomatic and exemption status.

Maintenance of Records:
Purchase, Production, Removal, Sales and Stock Register, duly attested by the Excise Officer needs to be maintained. Excise Records need to be safely kept for 6 Years.

Time Bar for Excise Assessment:


Tax Assessment shall be done within 4 Years from the date of submission of Excise Return; otherwise, the returned submitted shall be deemed as assessed. However, in case of evasion of excise by means of false return or other fraud, the department may order for Re-assessment at any point of time; no time bar shall be applicable in the case.

19

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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Bar on Gift & Cash Discount:


Bar has been imposed to conduct any Gift Programme by liquor, beer & cigarette Industries or their sellers. No discounts shall be availed by liquor, beer & cigarette Industries to sellers who are not registered under VAT.

Excise Exemption to Industries using Domestic Scraps:


Industries, manufacturing goods by using 90% or more than 90% domestic scraps, continue to be exempted from Excise Duty.

Abolishment of Excise License Renewal:


Excise License Renewal for the production, import, export, storage, sale and distribution of all other excisable items under Self-Removal System continues to be abolished [except for Brick Industry, Stone Crusher and Tobacco Products Manufacturer (Pan Masala, Chewing Tobacco, Gutka & Khaini), Khandsari Industry, import of Khudo & Jaggery]. Likewise, Excise License for import of Excisable Goods under Diplomatic Facility recommended by the Foreign Ministry continues to be abolished.

Removal of Excise in Following Products:


Products PlasticPackingMaterials(H.C.6305.33.00) ExciseRate F/Y2068/69 Earlier 5% Remarks Removed

Increase in Excise Tariff for F/Y 2068/69 - Few Major Items:


Products FruitJuice SoftDrink(AlcoholFree) PanMasala(containingLime) DrinksotherthanBeer/Winewithalcoholabove12%(Import) Beer Cigar(AllTypes) RawUnpackedTobacco(onlyonimport) RawTobaccopackedwithlime Cigarette70MMwithoutFilter Cigarette70MMwithFilter Cigarette(over70upto75MM)withFilter Cigarette(over75upto85MM)withFilter Cigarette(over85MM)withFilter PipeTobacco ExciseRate F/Y2068/69 Earlier Rs.3.50/Litre Rs.4.50/Litre Rs.275/Kg Rs.189/Litre Rs.80/Litre Rs.7/Pc Rs.60/Kg Rs.160/Kg Rs.252/M Rs.533/M Rs.681/M Rs.872/M Rs.1135/M Rs.700/Kg Rs.2/Litre Rs.2.50/Litre Rs.250/Kg Rs.167/Litre Rs.72/Litre Rs.6/Pc Rs.55/Kg Rs.145/Kg Rs.234/M Rs.494/M Rs.633/M Rs.811/M Rs.1055/M Rs.625/Kg Remarks Increased Increased Increased Increased Increased Increased Increased Increased Increased Increased Increased Increased Increased Increased

There has been increase in excise duty of liquor items.

20

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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No Changes in Excise Tariff for F/Y 2068/69 - Few Major Products:


Products ExciseRate F/Y2068/69 Earlier Rs.180/M.T Rs.180/M.T Rs.600/1000 Rs.600/1000 5% 5% 60% 60% 55% 55% 60% 60% 55% 55% 50% 50% 30% 30% 35% 35% 35% 35% 35% 35% 5% 5% 40% 40% 5% 5% Rs.115/Kg Rs.115/Kg Rs.10/Kg Rs.10/Kg Remarks StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo StatusQuo

Cement AllTypesof(Ceramics)Bricks(exceptDomesticProduction) AlltypesofPaints Car,Jeep&Van(CustomCode8702&8703) MicroBus1114Seater(CustomCode8702) DoubleCabPickUp(CustomCode8704) 3Wheeler(AutoRickshaw)(CustomCode8703)&Chassis SingleCabPickUp(CustomCode8704)&Chassis DeliveryVan(H.C.8704) MiniBus1525Seater(CustomCode8702.10.20) MiniBus1525Seater(CustomCode8702.90.20) 1525SeaterVehicle(CustomCode8702)&Chassis Bus&Truck(H.C.8702&8704) Motorcycle(CustomCode8711) Marble/GlazedTiles(6908) Kattha KatthaJuice Molasses Rs.40/Quintal Rs.40/Quintal DenaturedSpirit(8099%Alcohol) Rs.10/Litre Rs.10/Litre Thinner,Solvent Rs.22/Litre Rs.22/Litre IronRod[7213,7214,7215(including7214.99.10)] Rs.1000/MT Rs.1000/MT 10% 10% Equipmentwithatleast2functionsoutofPrinter,Copier&Fax Microphone 5% 5% SmartCard 5% 5% TelevisionCamera,DigitalCamera&VideoCameraRecorder 5% 5% Plates,Cylinders&EquipmentforPrintingPress(H.C.84.43) 10% 10% Microphone,LoudSpeaker(H.C.85.18) 5% 5% Television,Video,Digitalcamera(85.25) 5% 5% OpticalFibreCables(H.C.85.44.70) 10% 10% InsulatedWire,Cables,Conductors 15% 15% PlasticPackingGoods(H.C.3926) 5% 5% PlasticOtherGoods(H.C.3926.90.90) 5% 5% ColouredTelevision 5% 5% PictureTubeofColouredTelevision 5% 5% TelevisionReceiverParts(H.C.85.29) 10% 15% JunkFood(Kurkure,Kurmure,CheeseBall,Lays,Pastryetc. underH.C.2106.90.10) Noodles,Macroni&Pasta Rs7.50/Kg Rs7.50/Kg Rs7.50/Kg Rs7.50/Kg

21

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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Sundries:
50 % Exemption on Excise Duty on domestic production of Motorcycle & 25 % Exemption on Excise Duty on domestic production of other vehicles. 80 % Exemption on Excise Duty on domestic production of Brandy from local fruits/vegetables by industries established in Highly Undeveloped Area as defined by Schedule 9 of Industrial Policy, 2067. Following Vehicles are exempted from Excise Duty: Ambulance, Dead-Body Carrying Vehicle, Chassis of Battery Operated Tempo and Scooter meant for disabled/incapacitated person.. Collection of Excise Duty on Vehicles Stocks purchased up to F/Y 2065-66 shall be as per Finance Act, 2065 (i.e. Excise @ 15% shall be levied). Electrical Vehicles continues to be exempted from Excise Duty. MS Wire Rod in Coil (H.C. 7213.91.10) imported as raw material by industries continues to be subject to Excise Duty Exemption on the recommendation of Department of Industries. Excise Duty continues to be exempted on domestic production of Marbles. System of Public Notification of MRP for liquor, beer & cigarette at the beginning of F/Y and at the time of changes in price has been introduced.

Remarks:
For Exhaustive List of Excise Duty, please refer to Revised Schedule of Excise Tariff of Excise Act, 2058 given in Finance Ordinance, 2068.

22

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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C.3 Custom Duty: Custom Service Charges:


Custom Service Charges on import/export of goods (in excess of Rs. 5000) continues to be as follows:

Charges per Pragyapan Patra On Exports On Imports

Charges Rs. 600 Rs. 500

LDT (Local Development Tax):


Local Development Tax (LDT) continues to be annulled.

Revision in Import Duty:


Import Duty of most of the items has remained same. Import Duty has been revised in following items:
Custom Code 2523.10.00 2523.29.00 Cement Clinkers Portland Cement Other Description Custom Duty Rate F/Y 2068/69 Earlier Year Rs 2200 Per M.T Rs 3550 Per M.T 20% 15% Rs 1800 Per M.T Rs 3150 Per M.T 15%

9504.40.00
3808.91.10

Playing Cards
Anti Mosquito Products

No Change in Import Duty in most of the items Few Major Items:


Custom Code Description Custom Duty Rate

71.08
71.06 1704.10.00 1704.90.00 1806.10.00 / 1806.20.00 / 1806.31.00 / 1806.32.00 / 1806.90.00 40.11 / 40/.12 / 40.13

Gold
Silver Chewing Gum, whether or not sugar coated Other Sugar Confectionery Chocolate & other food preparation containing cocoa Tyre & Tube Crude Soybean Oil, Crude Sunflower Oil & Crude Palmoline Oil imported by Vegetable Ghee & Mustard Oil Industries for Domestic Production. Cigars, cheroots, cigarillos & cigarettes containing tobacco Cigarettes containing tobacco Other

Rs. 1000 / 10 Grams Rs. 24 / 10 Grams


30% 30% 30% 20% 2.50%

2402.10.00 2402.20.00 2402.90.00

Per Thousand sticks Rs 2000

23

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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Partial Exemption of Import Duty-Major Items:


Particulars Sanitary Towel, Towel for preventing bleeding, Bed & Baby Diapers under HS Code 4818 & 5601 Mill Machinery & Equipment imported by Tomato Ketchup industries that are run through cooperatives on the recommendation of the Ministry of Agriculture & Cooperatives Composite LPG Cylinders under HS Code 3923 (recommended by Nepal Gunastar & Naptaul Bibhaag) Sewing Machine (HS Code 84.52) that contribute to Self Employment Sunflower Seeds and Soybean Seeds imported for manufacture of Soybean Oil and Sunflower Oil. Soybean Cake imported for Animal Feed Industries. Maize Seed & Sugar Cane imported by industries
Equipment (under 90.27) for research purpose, imported by Pharmaceuticals Industries Machinery Equipment required for Bee-Keeping viz. Metal Barrel, Bee Brush, Gear Pump, Wheel Plate etc. (under H.S. Code 84.36) & Honey Filter & Juice Filter Machine (under H.S. Code 84.33). Generator with Capacity of 10 KW or more. Aircraft, Helicopter, their Gear Box, Engine, Tyre, Battery, Nut, Bolt, Rivet & Parts. (In case of Lease, such 1% Custom Duty shall be refunded, if aircraft/helicopter/engine is returned within 3 Years of Import) Seed of Tori, Rayo, Sarsyo and Canola (Rapeseed) Machine, Equipment, Parts imported by industries (other than H.C. 90.27 goods having Zero Custom Duty) Diamond under Heading 71.02 Natural, Precious & Semi-Precious Stones under Heading 71.03, 71.04 & 71.05 Gold Ornaments under H.C. 71.13 Raw Materials & Auxiliary Raw Materials for Tyre Manufacturing Industries. Vacuum Ironing Table and Steam Iron for Readymade Garments Exporting Industries. Generating Parts imported by Generator Manufacturing Industries having VAT Registration. Man Made Staple Fibers under Chapter 55 imported by Carpet Industries Pashmina Yarn under Chapter 51 Mill Machinery & Equipment (excepting parts) other than House-hold Equipment Under Custom Code 84 having Custom Duty Rate of 5% Air condition having capacity above 4 Ton (under chapter 84) imported by the industries for their industrial purpose. Tanker (under 87) for transportation of Milk imported by the Dairy Industry. Cotton Yarn under heading of custom code 52.05 and 52.07 LP Gas Import of Polyester Film, BOPP film, Extracted Poly-film under heading of 39.19, 39.20 and 39.21 by industries registered in VAT and producing Poly-coating Paper and Printed Lamination Film. Filler Master Batch under Custom Code 39.20.
24 G. K. Agrawal & Co. (Chartered Accountants)

Custom Duty Rate - 10% Custom Duty. - 1% Custom Duty. - 15% Custom Duty. - 1% Custom Duty. - 50% Rebate on Custom Duty. - 68% Rebate on Agriculture Reform Fee 1% Custom Duty 1% Custom Duty 1% Custom Duty 1% Custom Duty 1% Custom Duty 1% Custom Duty 1% Custom Duty 1% Custom Duty 10% Custom Duty 1% Custom Duty 1% Custom Duty 1% Custom Duty 90% Rebate 1% Custom Duty 4% Custom Duty 5% Custom Duty 80% Rebate 80% Rebate 5% Custom Duty 10% Custom Duty 10% Custom Duty

Synopsis of Nepal Budget 2068

Only For Private Circulation Custom Duty Rate 5% Custom Duty 50% Rebate 50% Rebate 10% Custom Duty 15% Custom Duty 1% Custom Duty 1% Custom Duty 50% Rebate 1% Custom Duty 10% Custom Duty

Particulars Sari, Lungi, Cotton Towel and Cotton Dhoti under Custom Code 62.11. Vehicles under Heading 87 operated on Electricity / Battery Tallow Oil (H.C. 15.03), Sodium Silicate (H.C. 2839) & Palm Acid Oil, Palm Fatty Acid & Acid Oil (H.C. 3823) imported by Industries manufacturing Distilled Fatty Acid/ Steric Acid / Glycerin / Soap having Splitting & Distillation Plant. Vehicles under Custom Code 87.04 installed with full refrigeration system for purpose of transport of goods in refrigerated condition UPVC Corrugated Roofing Sheet (Tiles) under Custom Code 3918 Machinery, Equipment and its parts used for production of organic fuel Equipment imported by industries for Pollution Control Tin box (under 80.07) with its printed name imported by the Dairy Industry. Raw Material, Auxiliary Materials, Chemicals & Packing Materials of Pharmaceutical Industry on recommendation of DDA Iron Pipe (for production of leg-guard) imported by Leg-guard Manufacturing Industry on recommendation of Department of Industries. Cable, Battery & Telecommunication Equipment (other than Tower Structure & Shelter) imported for establishment of Exchange and network expansion in rural areas by government / private sector telecommunication operator upon recommendation of Information & Communication Ministry, having Custom Duty more than 5%

7% Custom Duty

Import Duty on Vehicles Remains Unchanged - Few Major Items:


Motor Cycles Tractor (H.C. 87.01) Bus / Mini Bus (H.C. 87.02) Car / Jeep / Van (H.C. 87.02) : : : : 30% 5% 30% 80%

Restriction on Import of Vehicles:


New Vehicles or any Mode of Transportation can be imported from the Manufacturer Company or Authorized Agent situated at manufacturing companys country only. Such Vehicles can only be imported by Authorized Dealers in Nepal. Non compliance of above this provision may lead to confiscation of such imported vehicles. Reconditioned, Used Vehicles / Mode of Transportation and Vehicles / Mode of Transportation not meeting Nepal Vehicle Pollution Standard 2056 are prohibited to be imported (Exception: Fire Brigade)

Full Exemption of Import Duty Continued-Major Items:


Pet Chips (Custom Code: 3907.60.00) by POY Manufacturing Industries (within limit prescribed by the Department of Industries). Fertilizer under chapter 31. Raw Jute under Chapter 53 to be imported by Jute Industries. POY & Human Made Staple Fibers under Chapter 54 & 55 imported by VAT registered Yarn Industries. Chassis, Engine, Motor & Battery Charger imported by Manufacturing Industry of Electricity/Solar/Battery operated 3-Wheeler or 4-Wheeler Vehicles. Various Goods (viz. White Cane, Brale Printer etc.) used by blind people.
25 G. K. Agrawal & Co. (Chartered Accountants)

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Various Goods (viz. Wheel Chair, Tricycle, Artificial Organs, Hearing Aid, Shoes etc.) used by handicapped people. Spare Parts imported by Jute Industries for operation of industry under recommendation of Department of Industries. Bath Concentrate (Solid or Liquid) used for Dialysis under H.C. 38.24 for Kidney Patients. Powder & Remnants of Bone (05.06) used in poultry feed imported by Poultry Feed Industries or Hatchery Firm. Machinery, tools and spare parts (not manufactured in Nepal) and raw material (Steel Sheet required to manufacture such equipment to be imported for generation / transmission / distribution / operation / maintenance by Hydro-power, on recommendation of Electricity Development Department. Zatropa (Sajiwan) grain and seed for manufacture of Organic Fuel.

Continuity to Abolishment of Import Duty Few Major Items:


Cellular Mobile Phone, Smart Cards, Television/ Digital Camera & Video Camera Recorder, Plates, Cylinders and other Equipment used by Printing Press (Custom Code 84.43), Computer Hard Disk, Parts of Television Receiver etc.

Sundries:
The rate of custom duty on import shall be levied as per Annex 1 of the Finance Ordinance, 2068 for F/Y 2068/69 w.e.f. July 15, 2011. Arrangement has been made for declaring Maximum Retail Price of the imported goods at the customs point in order to make the customs valuation realistic and discourage under-invoicing. Rebate in Custom duty on goods of Indian Origin imported from India (other than the goods on which custom duty is levied on quantitative rate) continues to be as follows:

For goods falling under Duty Rate up to 30% For goods falling under Duty Rate Above 30%

: :

7% Rebate 5% Rebate

4% Rebate in Custom duty on goods of Chinese Origin imported from China through Letter of Credit (other than the goods on which custom duty is levied on quantitative rate) is continued. Concessional Custom duty on goods imported from SAARC Countries other than goods listed under Section 20 of Annex 1 of the Finance Ordinance, 2068 through Letter of Credit has further been reduced:
CustomDutyRateason Poush17,2062 5% 10% 15% 25% 35% 40% 80% NewCustomDuty RateApplicable 5% 7% 9.25% 13.75% 17.50% 17.50% 17.50% EarlierCustom DutyRate 5% 7.50% 10.50% 16% 21% 21% 21%

(Note: In case the Custom Duty Rate above is higher than the rate prescribed under Annex 1 of the Finance Ordinance, 2068; the lower rate shall be applicable.) For goods imported under DRP facility from India; Excise Duty paid in India shall be set off against Custom Duty (to the extent of Excise Duty or Custom Duty whichever is lower). However,
26 G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

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such excise duty shall not be adjusted against freight, insurance, valuation difference and other expenses. Raw Materials and Auxiliary Materials (including Packing Materials not manufactured in Nepal) can be imported by industries not having facility of Bonded Warehouse upon deposit of Custom Duty (on Dharauti), for manufacture of its finished products for the purpose of exported through L/C or Banking Channels or Local Sale in Convertible Foreign Currency within 12 months from the date of import. At least 10% Value Addition is required for the same. However, in case of strike, natural disaster or circumstances beyond control, extension up to 6 months may be given by the Customs Chief, if applied for. Likewise, 10% penalty shall be imposed if such finished products are not exported / sold in convertible foreign currency within the stipulated period i.e. 12 months. However, such imports have to be made from one custom point only. Arrangement has been continued for refunding the customs duty paid by the importer on the scooter used by handicapped people at the time of the registration of such vehicle in his name at Transport Management Office on the recommendation of the concerned agency. 100% penalty on Custom Duty shall be imposed if transaction value is under declared by the importer. Flat Rate custom duty on L.C.D., Plasma or L.E.D. brought in by the Nepalese passengers returning has been reduced.

Export Duty:
Export Duty of most of the items has remained same. Export Duty of certain items are given below:
Sub Heading
1404.90.10 1404.90.20 1404.90.30 2505.10.00 2505.90.00 2516.20.10 2517.10.10 2517.20.10 2516.20.20 2517.10.20 2517.20.20 2516.20.30 2517.10.30 2517.49.10 2517.49.90 3203.00.10 3203.00.90

Item
Semi Finished Khayar Kattha (Kattha Juice) Khayar Kattha Rudraksha Seed Silica Sand and Quartz Sand Other Sand

Export Duty Rate F/Y 2068/69 Earlier Year


Rs.10/kg Rs. 5/kg Rs. 2/kg Rs. 400/m3 Rs. 400/m3 Rs.25/kg Rs. 5/kg Rs. 2/kg Rs. 400/m3 Rs. 400/m3 Rs. 200/m3

Gravel, Broken or Crushed Stone, Concrete, Rs. 200/m3 Pebbles up to 2.5 inch Gravel, Broken or Crushed Stone, Concrete, Rs. 400/m3 Pebbles above 2.5 inch Broken or Crushed Stone and Mixture of Sand and Crushed Stone Dust of Stone produced in Crusher Industry Other produced in Crusher Industry Khayar Kutchh Other Rs. 400/m3 Rs. 200/m3 Rs. 200/m3 Rs. 3/kg Rs. 3/kg

Rs. 400/m3 Rs. 400/m3 Rs. 200/m3 Rs. 200/m3 Rs. 3/kg Rs. 3/kg

Remarks:
For Exhaustive List of Import Custom Duty, please refer to Schedule 1 given in Finance Ordinance, 2068. For Exhaustive List of Export Custom Duty, please refer to Schedule 2 given in Finance Ordinance, 2068.
27 G. K. Agrawal & Co. (Chartered Accountants)

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D. Miscellaneous:
Special Provision relating to Vehicles - Arrangements have been continued for the vehicles importers to publish mandatorily the MRP of the vehicles in the national-level daily newspaper in every 4 months. In case of non compliance of the same, the department of customs may stop import and sale of such importer and pursue investigation. - Mandatory Requirement continues for the buyers of Vehicle in excess of Rs. 2 Million, to make payment through Account Payee Cheque to the supplier of the vehicle. - Passenger Vehicle & Vehicle for Transportation Means can be imported into Nepal by Authorized dealers only.

SpecialProvisionrelatingtoEducationServiceTax
-1 % Education Service Tax shall be collected on the Admission Fee and Monthly Fees charged by charged

by Private Sector Educational Institutions providing education higher than Higher Secondary Level all over the country & Private Sector Educational Institutions providing education up to Higher Secondary Level in Kathmandu Valley, Sub-Metropolitan City, Municipality & District Head Quarters & places prescribed by IRD.
-Such Service Tax should be collected by raising Invoices. -Education Service Tax, so collected, and 4-Monthly Return for the same needs to be deposited at the IRO within 25 days from the end of the 4-Month period. -Fine Rs. 1000 per Return shall be levied upon Non submission of Return. -Interest @ 15% p.a. shall be levied in case of non-deposit of Service Tax on time. The Tax Officer may order the closure of such institution upon non-deposit of due Service Tax for a period of 3 months, -1 % Education Service Tax shall be collected from students pursuing abroad for studies, out of foreign exchange allowed. The onus to deduct such Tax and to deposit the same within 15 days from the month end at the Inland Revenue Office shall be on banks providing foreign exchange.

Agriculture Reform Fee -Agriculture Reform Fee continues to be 5%. -No such fee shall be charged, if custom duty is levied Special Provision relating to Waiver of Fee & Penalty of Khandsari Industries Annual Renewal Fee up to F/Y 2067/68 payable by Khandsari Industries utilizing Vertical Roller & Horizontal Roller (up to 10 HP), if paid as per rate prescribed for F/Y 2068/69 within F/Y 2068/69; balance late fee and penalty shall be waived.

Casino Royalty:
Annual Casino Royalty continues to be Rs. 20 Million. The royalty has to be paid within 2 months from the start of the Financial Year. Compulsory Renewal of Casino License before the start of the Financial Year has to be made. Casino License shall not be renewed if there is non-payment of Royalty, Fine etc.

28

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Medical Service Tax:


Medical Service Tax continues to be levied @ 5% on Medical Services provided by entities other than Nepal Government Community Hospital. Alternately, they may be voluntarily registered with VAT whereby they can collect VAT @ 15% instead of Medical Service Tax @ 5%. VAT needs to be collected for a period of 5 Years only from the date of registration with VAT. Medical Service Tax, so collected, and 4-Monthly Return for the same needs to be deposited at the IRO within 25 days from the end of the 4-Month period. Fine Rs. 1000 per Return shall be levied upon Non submission of Return. Interest @ 15% p.a. shall be levied in case of non-deposit of Service Tax on time. The Tax Officer may order the closure of such institution upon non-deposit of due Service Charges for of 3 months.

Pollution Control Fee:


Pollution Control Fee continues to be levied @ Rs. 0.50/Litre shall be levied on local sale of petrol & diesel within Nepal. NOC has to deposit the Monthly Fee for the same within 25th of next month.

Road Construction & Improvement Fee:


Road Construction & Improvement Fee, levied at the time of import, continues to be levied as follows:
Items

Petrol Diesel

Fee Amount Rs 4 / Litre Re 2 / Litre

Road Construction & Maintenance Fee:


Road Construction & Maintenance Fee, levied at the time of registration of vehicle, continues to be levied as follows:
Items

Car, Jeep, Van, Microbus, Bus, Truck, Tripper, Truck Mixture, Mini Bus & Mini Truck. Motorcycle

2068/69 5 % of Cost Rs. 6000

Earlier Year 5 % of Cost Rs. 6000

However, the above shall not be applicable to diplomatic mission, person with diplomatic facility, ambulance and Dead-Body Carrying Vehicle. Electrical / Solar / Battery operated Vehicles shall be eligible for 50% exemption on above mentioned Road Construction & Maintenance Fee. Scooter up to 150 C.C. designed for disabled shall be fully exempt from Road Construction & Maintenance Fee.

Administrative Review (Appeal at DG)


Provision continues to file an application in the department for the administrative review in the cases related to Income Tax, Value Added Tax as well as Excise Duty. Cash deposit of 1/3rd of disputed tax and 100% of undisputed tax payable is required. In case of non-decision within 60 days from the date of application, resort may be taken to Revenue Tribunal.
29 G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

Only For Private Circulation

Vehicle Tax:
Vehicle Tax for Private Vehicles continues to be as follows:
Private Vehicles Car, Jeep, Van, Micro Bus: Up to 1000 CC 1001-1500 CC 1501-2000 CC 2001-2900 CC Above 2900 CC Dozer, Excavator, Loader, Roller, Tripper, Crane Mini Tipper Auto, 3 Wheeler, Tempo, Tractor, Power Tiller: Auto Rickshaw, 3 Wheeler & Tempo Tractor Power Tiller Mini Truck / Mini Bus Truck / Bus Motor Cycle: Up to 125 CC 126 CC 250 CC Above 251 CC 2068/69 16,500 18,000 20,000 27,500 44,000 26,000 16,900 4,400 2,800 2,300 14,300 22,000 2,000 3,500 5,000 2,000 3,500 5,000 4,400 2,800 2,300 14,300 22,000 Earlier 16,500 16,500 16,500 27,500 44,000 26,000 26,000

Vehicle Tax for Public Vehicles shall be as follows:


Public Vehicles Car, Jeep, Van, Micro Bus Up to 1300 CC 1301-2000 CC 2001-2900 CC 2901-4000 CC Above 4000 CC Dozer, Excavator, Loader, Roller, Tripper, Crane Auto, 3 Wheeler, Tempo, Power Tiller Auto Rickshaw, 3 Wheeler & Tempo Tractor Power Tiller Mini Truck / Mini Bus Truck / Bus 2068/69 5,000 6,000 7,500 9,600 11,800 12,500 2,900 1,450 1,150 8,200 10,600 Earlier 5,000 6,000 7,500 9,600 11,800 12,500 2,900 1,450 1,150 8,200 10,600

Scooter up to 150 C.C. designed for disabled shall be fully exempt from Vehicle Tax. Government Vehicle shall be subject to Vehicle Tax for Public Vehicles. Electric Vehicles shall be subject to 100% Tax Exemption. Vehicles other than Petrol Vehicles shall be subject to 20% Tax Exemption.
30 G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068

Only For Private Circulation

Annual Vehicle Tax shall be levied on Pro-rata Basis for vehicles in the year of import; however, trading stock shall not be subject to such tax. Bus, Mini Bus & Micro Bus meant for rental shall be subject to 60% Rebate on account of availing discount of fare to the students. Renewal of blue book on a lump sum payment of vehicle tax at existing rates for 5 years can be done, if the owner of any type of vehicle so desires. Vehicle Tax on Sabbahan, Ambulance & Fire Brigades are exempted.

Land / Building Registration Fee:


Registration Fee for Flats constructed under Housing Projects continues to be 1%. Flats having construction in excess of 5 Storey shall be given exemption of 50%. Registration Fee for Bungalows (house along with land) constructed under Housing Projects continues to be 2 %. Registration Fee for Rajinama above Rs. 25,000 shall be levied @ 4% in Municipality and @ 2% in VDC. 0.50% Additional Registration Fee continues to be charged for buying and selling the land/building within the metropolitan, sub-metropolitan, municipalities of Kathmandu Valley and VDC adjoining these areas. Registration Fee shall be levied @ 3% in designated VDCs of Kathmandu, Lalitpur & Bhaktapur District as well as other districts. Rebate in Land Registration Fees continues to be 25% if land is transferred in womens name. Rebate in Land Registration Fees to be 25% if land is transferred in person above 70 years age. Rebate in Land Registration Fee of 50% to be given to Manufacturing Industries with direct Employment to 300 Nepalese Workers persons for establishment or expansion of industry. If not used for the declared purpose, the rebate shall be waived and such amount be collected. For a single transaction of purchase/sale of land or building of Rs. 50 Lacs or more; Good for Payment Cheque has to be given to the seller or the transaction amount has to be deposited in the Bank Account of the seller for the purpose of transfer of the same at the Malpot Ofiice. Registration Fee shall be waived for banks / insurance who merge. Rs. 100 only shall be charged for the change of ownership of land that is currently under the ownership of husband to the joint ownership of husband and wife.

Service Charges for Mortgage Registration against loan from Financial Institution & Co-operative Society:
Mortgage Registration Fee remains same as follows:
Loan Amount Up to 1 Lac Above 1 Lac - 5 Lacs Above 5 Lacs - 10 Lacs Above 10 Lacs - 20 Lacs Above 20 Lacs - 50 Lacs Above 50 Lacs - 100 Lacs Above 100 Lacs - 200 Lacs Above 200 Lacs 31 G. K. Agrawal & Co. (Chartered Accountants) Amount 500 700 1,200 1,800 3,000 10,000 15,000 30,000

Synopsis of Nepal Budget 2068

Only For Private Circulation

E. KEY BUDGET ANNOUNCEMENTS PROPOSED IN BUDGET SPEECH **


Arrangement in Property Tax Act will be made whereby an individual, family or company can make a voluntary disclosure of all the fixed and movable properties including the land, ornaments, cash, deposits in banks/financial institutions, lending, investment in hare/debentures and vehicles to the Inland Revenue Offices of the Government of Nepal after paying a certain percentage of tax. Except for tax purpose, such information will be kept confidential. This voluntary disclosure of property will be treated as tax base effective from the Fiscal Year 2012-13. Arrangement will be made to allocate the revenue generated from the Voluntary Disclosure of property for the solution of energy crisis faced by the country In order to make the people involved in the registration process of land and house transactions more professional and respectful, arrangement will be made so that only persons having Permanent Account Number (PAN) will be eligible for such transactions. Long outstanding revenue arrears will be classified and tabulated on the basis of the amount and due period and special campaign will be conducted to collect such arrears. Submission of local purchase and sales statements above one hundred thousand Rupees will have to be produced when submitting VAT return by electronic means. This provision will be started from the Large Taxpayer Office.

** These Key Budget Announcements have not been addressed in the Finance Ordinance, 2068. For the implementation of these announcements, notification through Official Gazette would be required.

32

G. K. Agrawal & Co. (Chartered Accountants)

Synopsis of Nepal Budget 2068 NOTES

Only For Private Circulation

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G. K. Agrawal & Co. (Chartered Accountants)