VAT Return Filing and Payment in Nepal

Schedule 10

The prescribed VAT return is:

Schedule 10

IRD maintains the VAT-return filing process through its Taxpayer Portal.

The current Schedule 10 format supports tax-period classifications including:

• monthly;

• bi-monthly;

• quarterly,

where the taxpayer is legally eligible for the relevant period.

Do not select a longer filing period merely for convenience.

VAT Return Components

The return generally reconciles:

Sales

Taxable sales
Zero-rated sales
Exempt/other relevant sales

Output VAT

VAT collected/accrued on taxable sales

Purchases

Domestic taxable purchases
Imports
Capital purchases

Input VAT

Eligible Input VAT

Adjustments

Debit/credit notes
Prior adjustments
Other prescribed items

Final Position

VAT payable or credit carried forward/refund claimed.

VAT Payable

The basic formula is: Output VAT

−

Allowable Input VAT

±

adjustments = VAT payable / credit balance

Example

Output VAT: NPR 200,000

Allowable Input VAT: NPR 150,000

Net payable: NPR 50,000

Due Date

For an ordinary monthly taxpayer: Tax period:

Shrawan

Return/payment due: within 25 days after Shrawan ends

IRD repeatedly describes the VAT return as the return submitted within 25 days after the tax period.

Nil Return

Suppose the business had: Sales: zero

Purchases: zero

VAT payable: zero

A return should still generally be filed where the VAT registration remains active.

Do not assume:

No transaction = no VAT return.

VAT Payment

Where the VAT return shows tax payable, the amount should be deposited within the applicable statutory period using the prescribed IRD payment mechanism/revenue code.

Return filing without paying the reported VAT can create:

• additional fee;

• interest;

• tax arrears;

• tax-clearance problems.

Late Return Penalty

IRD's current FAQ states that failure to file the VAT return on time can attract a penalty of: 0.05% of tax payable per day

or

NPR 1,000 per tax period whichever is higher.

The exact computation should be checked for the relevant case, especially where the return is nil or tax has been separately assessed.

Late Payment

Late VAT payment can generate separate:

• additional fee; and

• interest

under the VAT Act.

These are distinct from the late-return penalty.

For example, IRD's current non-resident VAT procedure reflects the statutory structure of:

• 10% additional fee under Section 19(2); and

• 15% interest under Section 26

for overdue VAT payment.

For domestic taxpayers, the applicable Act provisions should be used directly in the final calculation.

Return Filing Does Not Fix Incorrect Accounting

Before filing, reconcile: Sales book

↔ Output VAT

Purchase book

↔ Input VAT

General ledger

↔ VAT control accounts

Customs

↔ Import VAT

Debit/Credit Notes

↔ VAT adjustments

Financial statements

↔ turnover/purchases.

Do not use the VAT return as a balancing account.

VAT Return vs Financial Statements

Annual financial statements may aggregate transactions differently from VAT returns.

Nevertheless, major differences in:

• sales;

• purchases;

• imports;

• inventory;

• VAT payable

must be explainable.

A year-end VAT reconciliation should therefore be part of the tax file.

Input VAT Credit Carried Forward

If Input VAT exceeds Output VAT:

the excess generally carries forward to the next tax period unless the taxpayer qualifies for and claims refund.

Rule 39 specifically permits the excess credit to move to the next period.

Refund Claim Must Be Made Through Return

IRD's current FAQ says that a VAT-registered person seeking a qualifying VAT refund must claim it through the Schedule 10 VAT return rather than simply submitting a separate refund application after omitting it from the return.

This makes accurate return filing particularly important for exporters/refund claimants.

Electronic Filing

CMA recommends:

1. close VAT accounting period;

2. reconcile sales/purchases;

3. prepare Schedule 10;

4. review Input VAT restrictions;

5. verify tax payable/credit;

6. submit through IRD Taxpayer Portal;

7. make payment;

8. save return acknowledgement;

9. retain payment voucher.

VAT Return Workpaper

Maintain: VAT-WP-01 Sales reconciliation

VAT-WP-02 Output VAT

VAT-WP-03 Purchase reconciliation

VAT-WP-04 Input VAT

VAT-WP-05 Blocked/partial VAT

VAT-WP-06 Import VAT

VAT-WP-07 Debit/Credit notes

VAT-WP-08 Carry-forward/refund

VAT-WP-09 Payment

VAT-WP-10 Filed return

Keep these workpapers with the filed return and payment evidence.

VAT Return Checklist

• Correct tax period

• Sales book complete

• Purchase book complete

• Output VAT reconciled

• Input VAT invoices checked

• Blocked VAT removed

• Partial VAT adjusted

• Import VAT reconciled

• Debit/Credit Notes included

• Prior credit carried correctly

• VAT payable calculated

• Return filed within 25 days

• Tax paid within statutory period

• Filing acknowledgement saved

• Payment voucher saved

• Ledger reconciled after filing

Common Errors

Not filing a nil return

Claiming blocked Input VAT

Using purchase ledger total as Input VAT without invoice review

Forgetting debit/credit notes

Filing the return but not paying VAT

Carrying forward the wrong credit

Claiming refund outside the Schedule 10 mechanism

Further guidance and practical checks

VAT return filing should be the end of a monthly reconciliation process—not the first time the business attempts to reconcile its VAT accounts.

A correction window is not a right to refile every old return

The amended section 18(4) permits correction of a timely submitted VAT return within seven days of submission under the Department’s procedure. It does not establish an unrestricted ability to amend any historical return. Keep the original filing, correction reason and supporting evidence.