Relevant Sections of VAT Act 2052 and VAT Rules 2053
दफा ५. मूल्य अभिवृद्धि कर लाग्ने
दफा ५(१): यस ऐनमा अन्यथा व्यवस्था भएकोमा बाहेक देहायका कारोबारमा मूल्य अभिवृद्धि कर लाग्नेछ:
(क) नेपाल भित्र आपूर्ति भएका वस्तु वा सेवामा,
(ख) नेपाल भित्र आयात गरिएको वस्तु वा सेवामा,
(ग) नेपाल बाहिर निर्यात गरिएको वस्तु वा सेवामा,
दफा ५(२): प्रत्येक कारोबारको कर लाग्ने मूल्यमा कर लाग्नेछ ।
दफा ५(३): उपदफा (१) मा जुनसुकै कुरा लेखिएको भए तापनि अनुसूची–१ मा उल्लिखित वस्तु वा सेवाहरुको कारोबारमा कर लाग्ने छैन । साथै त्यस्तो वस्तु वा सेवाको खरिदमा पहिले लागेको कर दफा १७ बमोजिम कट्टी गर्न र दफा २४ बमोजिम फिर्ता लिन पाइने छैन ।
English Translation:
Section 5(1): Unless otherwise provided for in this Act, Goods & services imported into, exported outside and supplied within Nepal are taxable.
Section 5(2): Tax is applicable in the taxable value of the transaction.
Section 5(3): Notwithstanding anything contained in Section 5(1) no tax shall be levied on the transactions of goods or services set forth in Schedule 1, provided that any tax applicable on such goods or services at the time of purchase shall not be offset pursuant to section 17 and shall not be refunded pursuant to Section 24.
दफा ६. आपूर्तिको स्थान र समय
दफा ६(१): यस ऐन बमोजिम कर निर्धारण र असुल उपर गर्ने प्रयोजनको लागि कुनै वस्तु वा सेवाको आपूर्ति नेपालभित्र वा बाहिर भएको कुराको निर्धारण तोकिए बमोजिम हुनेछ ।
दफा ६(२): यस ऐन बमोजिम कर निर्धारण र असुल उपर गर्ने प्रयोजनको लागि कुनै वस्तु वा सेवाको आपूर्ति देहायको समयमध्येमा जुन पहिले हुन्छ सोही समयमा त्यस्तो वस्तु वा सेवाको आपूर्ति भएको मानिनेछ:–
(क) आपूर्तिकर्ताले बीजक जारी गरेको बखत,
(ख) वस्तुको आपूर्तिको हकमा प्रापकले आपूर्तिकर्ताको कारोबार स्थलबाट वस्तु उठाएको वा ग्रहण गरेको बखत,
(ग) सेवाको आपूर्तिको हकमा सेवा प्रदान भएको बखत,
(घ) आपूर्तिकर्ताले वस्तु वा सेवाको प्रतिफल प्राप्त गरेको बखत ।
दफा ६(३): उपदफा (२) मा जुनसुकै कुरा लेखिएको भए तापनि देहायका अवस्थाहरुमा देहाय बमोजिमको समयलाई आपूर्ति समय मानिनेछ:–
(क) निरन्तर रुपमा आपूर्ति हुने दूर सञ्चार सेवा वा त्यस्तै अन्य सार्वजनिक सेवाहरुको हकमा बीजक जारी गर्दाको समय,
(ख) करार बमोजिम किस्ताबन्दी रुपमा कुनै वस्तु वा सेवाको मूल्य एकभन्दा बढी दिनमा आंशिक रुपमा भुक्तानी हुने व्यवस्था भएकोमा भुक्तानी भएको वा करारमा भुक्तानी गर्नु पर्ने भनेर उल्लेख गरिएको दिनमध्ये जुन पहिले हुन्छ सो समय,
(ग) यस ऐन अन्तर्गत कर कट्टी सुविधा प्राप्त नहुने गरी प्रयोग भएका वस्तु वा सेवाको हकमा त्यस्तो वस्तु वा सेवा प्रयोग भएको समय ।
दफा ६(४): कुनै कारोबारको आपूर्ति समयको सम्बन्धमा उपदफा (२) मा उल्लिखित अवस्थाहरुमध्ये एकैपटक एकभन्दा बढी अवस्थाहरु लागू हुन सक्ने भएमा त्यस्तो कारोबारमा आपूर्तिको समयको निर्धारण महानिर्देशकले वस्तुगत आधारमा तोके बमोजिम हुनेछ ।
English Translation:
Section 6(1): For the purpose of assessment and collection of tax under this Act, the determination of the fact whether the supply of any goods or services has taken place within or outside of Nepal shall be as prescribed.
Section 6(2): For the purpose of assessment and collection of tax under this Act, the supply of any goods or services shall be considered to have taken place at the earliest time of the following times:
a. When the invoice is issued by the supplier
b. For supply of goods when the buyer removes or takes possession of the goods from the supplier’s transaction place
c. For supply of services when the service is provided by the supplier
d. When consideration is received by the supplier
Section 6(3): Notwithstanding anything contained in Section 6(2) the following time shall be considered as the time of supply in the following cases:
a. For telecommunication and similar services that are supplied continuously, when the invoice is raised.
b. For contractual provision is made to pay for the goods or service in installment basis, earlier of when the payment is being made or when the payment is accrued as per the contract
c. For goods or service whose tax credit cannot be availed under this Act, when such goods/service is used
Section 6(4): In the case of a transaction for which more than one provision of Section 6(3) is applicable at once, the supply time shall be as prescribed by the Director General on an objective basis.
नियम १५. वस्तुको आपूर्ति स्थानको निर्धारण
नियम १५: देहायको स्थानलाई वस्तुको आपूर्ति भएको स्थान मानिनेछः–
(क) बिक्री गरि हस्तान्तरण गरिएको चल वस्तुको आपूर्तिको स्थान जहाँ त्यस्तो वस्तु बिक्री गरिएको वा हस्तान्तरण गरिएको छ सोही ठाउँ,
(ख) स्वामित्व परिवर्तन गरिए पनि स्थान परिवर्तन गर्न नसकिने अचल वस्तुको सम्बन्धमा त्यस्तो वस्तु रहेको ठाउँ,
(ग) आयात गरिएको वस्तुको सम्बन्धमा त्यस्तो वस्तु नेपाल भित्र आयात गरिने नेपालको भन्सार विन्दू,
(घ) कुनै उत्पादक वा विक्रेताले कुनै वस्तु स्वयम् आफूलाई आपूर्ति गरेमा त्यस्तो वस्तुको उत्पादक वा विक्रेता रहेको स्थान
English Translation:
Rule 15: The following shall be considered to the place for supply of goods:
a. For moveable goods that is sold and transferred, the place where such goods is sold or transferred
b. For immovable goods (whose location cannot be changed even if the ownership has been transferred), the place where such goods is located
c. For goods that are imported, the place of custom point in Nepal where such goods are imported
d. For goods that are supplied to oneself (self-supply), the place where the producer/supplier of such goods resides
नियम १६. सेवाको आपूर्ति स्थानको निर्धारण
नियम १६: सेवाको आपूर्ति स्थान सेवाबाट लाभ प्राप्त गर्ने ठाउँ हुनेछ ।
English Translation:
Rule 16: Place where benefit of such service is received
दफा ७. करको दर
दफा ७(१): यस ऐन बमोजिम लाग्ने करको दर तेह्र प्रतिशतको एकल दर हुनेछ ।
दफा ७(२): उपदफा (१) मा जुनसुकै कुरा लेखिएको भए तापनि अनुसूची–२ मा उल्लिखित वस्तु वा सेवाको कारोबारमा शून्य दरमा कर लाग्नेछ ।
English Translation:
Section 7(1): Taxable transactions are taxed at the single positive rate of 13%.
Section 7(2): Exempted goods under Schedule 1 are not taxed and zero-rated under Schedule 2 goods are taxed at the rate of 0%.
अनुसूची २: शून्य दरमा कर लाग्ने वस्तु तथा सेवा
अनुसूची २ दफा (१): निर्यात हुने वस्तु
वस्तुको आपूर्ति देहाय बमोजिम भएको छ भन्ने कुरा प्रमाणित भएमा:
(क) निर्यात गरेको, वा
(ख) नेपालबाहिर गन्तव्य स्थान भएको अन्तर्राष्ट्रिय उडानमा स्टोरको रूपमा राखिएको, वा
(ग) नेपालबाहिर गन्तव्य स्थान भएको अन्तर्राष्ट्रिय उडानमा खुद्रा बिक्री वा आपूर्ति वा उपभोग गर्नका लागि राखिएको ।
अनुसूची २ दफा(२): नेपालबाहिरको व्यक्तिलाई आपूर्ति हुने सेवा:
(क) नेपालभित्र बसोबास भएको व्यक्तिले नेपालमा कुनै व्यवसायिक कारोबार, व्यवसायिक प्रतिनिधित्व वा कानूनी रूपमा मान्य प्रतिनिधि नभएको नेपालबाहिरका व्यक्तिलाई आपूर्ति गरेको सेवा,
(ख) नेपालभित्र बसोबास भई दर्ता भएको व्यक्तिले नेपाल बाहिर बसोबास भएको व्यक्तिलाई गरेको वस्तु वा सेवाको आपूर्ति ।
English Translation:
2. Export of goods: Where the supply of the goods is proved to be:
(a) goods exported; or,
(b) goods shipped for use as stores on a flight to an eventual destination outside Nepal; or,
(c) goods loaded for retail sale, supply or use on a flight to an eventual destination outside Nepal.
3. Export of services: Service exported to person outside Nepal:
(a) A supply of services by a person resident in Nepal to a person outside the Nepal and having no business transaction, business agent, or legal representative acting on his behalf in Nepal
(b) A supply of goods or services by a person resident and registered in Nepal to a person resident outside Nepal.
Let's marinate the brain with above provisions
When is supply of goods considered to be export?
When a moveable good is sold and transferred, the place of supply is deemed to be the place where the good is sold or transferred.
Goods can be exported as per the many prevalent international commercial terms for trade. It could be EXW (Ex Works), FCA (Free Carrier), CPT (Carriage Paid To), CIP (Carriage and Insurance Paid To) or FAS (Free Alongside Ship). In none of these international commercial terms for trade the place of supply is outside Nepal. However, they are still treated to be export and are zero rated as per Schedule 2 of the Value Added Tax Act 2058. In international commercial terms for trade on DAP (Delivered at Place), DPU (Delivered at Place Unloaded), DDP (Delivered Duty Paid), FOB (Free on Board), CFR (Cost and Freight), CIF (Cost, Insurance and Freight), the place of supply of goods is outside Nepal. Find a useful link to understanding INCOTERMS here.
Incoterms of Exporter of goods from Nepal | Sold & Transferred within Nepal? | Place of Supply | Is zero rated export under Schedule 2 of the Act? |
EXW (Ex Works) | Yes | Nepal | Yes* |
FCA (Free Carrier) | Yes | Nepal | Yes* |
CPT (Carriage Paid To) | Yes | Nepal | Yes* |
CIP (Carriage and Insurance Paid To) | Yes | Nepal | Yes* |
DAP (Delivered at Place) | No | Outside Nepal | Yes |
DPU (Delivered at Place Unloaded) | No | Outside Nepal | Yes |
DDP (Delivered Duty Paid) | No | Outside Nepal | Yes |
FAS (Free Alongside Ship) | Yes | Nepal | Yes* |
FOB (Free on Board) | No | Outside Nepal | Yes |
CFR (Cost and Freight) | No | Outside Nepal | Yes |
CIF (Cost, Insurance and Freight) | No | Outside Nepal | Yes |
Yes*: Yes, but the burden of proof of export lies with exporter as per Schedule 2(1) of VAT Act 2052.
When is supply of service considered to be export?
When a service is supplied, the place of supply is is deemed to be the place where the benefit of such service is received.
As per Schedule 2(2) of Vat At 2052, for supply to be considered as export of service it should be made to person outside the Nepal and having no business transaction, business agent, or legally recognized agent acting on his behalf in Nepal. Here, it might be wise to discuss the term “business transaction”.
Business transaction in an establishment refers to the unit through which where the business activities are carried out. Business establishment can be a physical unit/structure or even a deemed place of transaction. Business establishment could be structured in a country by the reason of business transaction taking place in that country or due to the presence of business agents or legally recognized agents acting on behalf of the main enterprise. In tax perspective business transactions refers to the transactions conducted by the business establishments in Nepal.
If the meaning of Schedule 2(2) of the Vat Act 2052 is construed in most conservative way, it could be wrongly interpreted that any supply of service to entities outside Nepal which also has business establishment (PE, Branch, Mgmt) in Nepal can never be export of service. However, it is not the intention of Schedule 2(2) of the Act. This would be against the concept of
1. The meaning of place of supply of service as per Rule 16
2. The concept of Consumption/Destination Principle of VAT
So, how should the test be done to identify whether the supply of the service is export of service?
All these tests should hold true:
Test 1: The service provided should be provided to person non-resident in Nepal
As per Schedule 2(2) of Vat Act 2052
Test 2: The service provided is intended to directly benefit the non-resident but not intended to directly benefit the Nepal establishment of the non-resident
As per Rule 16 of Vat Rules 2053
Test 3: The cost of service provided is not intended to be directly recharged to Nepal without any value additions
To confirm with Consumption Principle of VAT
If all these test are met, it can be safely assumed that the transaction relating to the supply of the service is an export of service.