Revenue Tribunal upholds decision to recover Rs 55m from Gorkha Brewery

KATHMANDU, Aug 15, 2013

The Revenue Tribunal has upheld the decision of Inland Revenue Department (IRD) to recover VAT and excise duty along with penalty worth Rs 55 million from the Gorkha Brewery.

The IRD had slapped Gorkha Brewery VAT with penalty of Rs 25 million and excise duty with penalty of Rs 30 million.
The Department of Revenue Investigation (DRI) had seized 14 truckloads, or 887 cartons, of beers without excise duty stickers or with used stickers issued by the IRD on October 25, 2008. The cartons also didn´t have labels.

“We found that the beers were supplied without using genuine stickers of IRD in an apparent attempt to evade VAT and excise duty,” an official at DRI, who has been looking into the case, said.

The DRI team had seized the consignments in Thankot while there were being transported to the capital from Gorkha Brewery´s production unit in Mukundapur of Nawalparasi.
After investigation, the DRI had decided to recover Rs 55 million in VAT and excise duty along with penalty from the brewer for revenue fraud.
Responding to the decision, the company had registered an application at IRD for administrative review of the case. However, IRD had upheld the decision, prompting Gorkha Brewery to knock the doors of the Revenue Tribunal.

Revenue officials also said the company was also found to have supplied 190 cartons of wines manufactured by another liquor company. “During our investigation we found that the firm was distributing liquors produced by another company which is against the existing law,” the official said.
Suspecting huge revenue fraud by the firm, DRI had form an investigation team, which found mismatch between record in books and actual stocks maintained at the factory´s warehouse. The team had also found that the company sold beers through loose bills, inflicting huge revenue loss on the government.

“We had decided to recover Rs 55 million from the company after we were convinced about the revenue fraud,” said the official.
Though DRI had initially put ban on sales of products manufactured by Gorkha Brewery, it had lifted the bank after accepting deposit of Rs 40 million from the brewer.

Source: Republica

VAT, income tax collection rises

KATHMANDU, JUNE 07: 

The recent revenue mobilisation trend has revealed that the contribution of customs to total revenue mobilisation has been decreasing unlike earlier years but that of Value Added Tax (VAT) and income tax has been increasing.

The contribution of customs has come down to 20 per cent, whereas the contribution of

VAT and income tax has gone up to 29 per cent and 22 per cent, respectively.

The country has to reduce customs duty according to its commitment to the global trade regime by 2015, thus the contribution of income tax and VAT must help cover customs revenue.

Thus, the country needs to expand the tax net and plug tax leakages, said finance minister Shankar Koirala during a meeting at the Finance Ministry here, today.

The organisational structure of the Inland Revenue Department has to be changed, Koirala said, asking the revenue administration to be alert on revenue leakages.

However, senior economic adviser to the finance ministry Dr Chiranjivi Nepal doubted the sustainability of the increase in revenue mobilisation. Suggesting for an expansion in the tax net, he asked the revenue administration to bring the informal sector under the tax net.

“Despite the delayed budget, revenue mobilisation has been encouraging, but bringing the informal economy under the tax net will help sustain the increasing trend.”

The informal sector is as big as the formal sector and has been hurting the economy. Rising inflation despite low money supply and decreasing remittance has been attributed to the ballooning informal sector that has hurt VAT mobilisation.

Though revenue mobilisation has been encouraging, VAT and excise mobilisation has not been satisfactory, said finance secretary Shanta Raj Subedi. “The revenue administration has to start a coordinated campaign to plug the VAT and excise loopholes,” he suggested, asking it to work on meeting the targets of the next two months.

Likewise, joint secretary Rajan Khanal apprised the meeting of the revenue administration’s weakness in bringing the informal sector under the tax net that has bled the economy white. “Rising imports, scientific valuation, reforms in revenue administration, and

increasing contribution of non-tax revenue are attributed to

the increased revenue mobilisation,” he said, adding that lack of capacity building of human resource, low participation of tax payers who are already in the tax net, and the inability to mobilise arrears are some of the weaknesses of the revenue administration.

Tight and disciplined revenue administration is key as the government has projected to achieve 30 per cent to 35 per cent revenue mobilisation growth in the next fiscal year 2013-14, as compared to the current fiscal year.

The government needs to mobilise only Rs 55.15 billion revenue — in the next two months — to meet the current fiscal year’s revenue mobilisation target of Rs 289.60 billion. It has been able to mobilise Rs 234.45 billion revenue against the target of Rs 226.05 billion — by the 10th month of the current fiscal year — swelling the government coffer, though it has been unable to spend on development activities as it has Rs 56 billion in its vault.

The government has mobilised Rs 68.29 billion VAT, Rs 52.12 billion income tax, Rs 46.73 billion customs, Rs 29.05 billion excise, Rs 30.34 billion under non-tax, and Rs 7.92 billion — including Rs 4.02 billion registration fee and Rs 3.90 billion transportation tax — under others to make it a total of Rs 234.45 billion by the end of 10 months of the current fiscal year.

The total revenue mobilisation is 23.35 per cent higher than the same period of last fiscal year 2011-12.

Source: THT

Govt to provide 50% VAT rebate on dairy products

KATHMANDU, March 7, 2013

Bowing down to pressure from big dairy producers, the government has decided to provide 50 percent Value Added Tax (VAT) rebate on sales of dairy products.

Local dairies were earlier exerting pressure on the government to exempt their products from VAT citing erosion in competitive power of their products to similar Indian products.

At one time, they had even threatened to re-introduce milk holidays and reduce fresh milk collection from dairy farmers to press their demands.

"We have recently decided to provide 50 percent VAT rebate on sales of dairy products as per the recommendation of the Ministry of Agriculture Development (MoAD) so that local dairies can strengthen their capacity and compete with Indian dairy products," Rajan Khanal, joint-secretary at the Ministry of Finance (MoF), told Republica.

Khanal said the new decision would be enforced once the government publishes list of VAT-exempt products through the gazette.

Once the decision is enforced, the government will start providing 50 percent VAT concession on sales of paneer, butter, clarified butter, cheese, ice cream and powdered milk. Fresh milk and curd are currently exempt from VAT.

Existing VAT Act has specified 13 product categories, including basic agricultural products, goods of basic need, live animal and animal products, agriculture inputs, medicine and health service, education, books and newspapers, artistic and cultural goods and services, transport service, services rendered by artists, writers, sportsman and artists, casinos service, financial service, insurance services, gold and woolen products, among others, as exempt from VAT.

Pradip Maharjan, president of the Dairy Industries Association, said Nepali dairies would be capable to compete with Indian products once VAT concession is provided.

"Indian products, which are entering Nepal without paying customs duty, are over 30 percent cheaper as compared to domestic products. VAT concession will help us bring down our production cost, making our products more competitive in the domestic market," said Maharjan.

The government decision to waive VAT on sugar, refined flour and vegetable ghee had also drawn flak from revenue officials in the past. The latest government´s move to provide VAT rebate on additional dairy goods has also created dissatisfaction among MoF officials.

"We are continuing to lose revenue from VAT every passing year due to waiver or concession of VAT on additional products due to pressure from different interest groups. Such trend has encouraged businesspeople to make unnecessary demands for VAT waiver," said an official at the Inland Revenue Department (IRD).

List of goods included in VAT exemption list has increased significantly over the last couple of years as the government continues to bow down to demands from entrepreneurs without considering the impact on revenue collection. The government reserves the authority to waive VAT on particular commodities if it deems necessary.

"Now, even tourism entrepreneurs have approached us to waive VAT on TV sets used in hotels, which is ridiculous," said the official.

Worse, the government has failed to bring new sectors under the net of VAT despite repeated attempts. Large number of brick kilns, law professionals, medical doctors and stationary producers, among others, are still not covered by VAT regime. As per the government´s estimate, at least 400 brick kilns alone are evading VAT worth Rs 400 million annually.

Collection of VAT--the largest government revenue source, which accounts for around 30 percent of the total revenue collection--rose to Rs 47.08 billion, up 18.06 percent, in the first seven months of the current fiscal year.

Source: Republica

Tax evading Gutkha producer fined Rs 5.49m

BIRGUNJ, Nov 11, 2012

Central Revenue Investigation Office (RIO), Pathlaiya, has slapped a tax and fine of Rs 5.49 million against Minakshi Product Ltd (MPL), a Gutkha (a tobacco-product) manufacturer, and asked the company to pay it as soon as possible.

“The amount was assessed based on the volume of value added tax (VAT) and excise duty it evaded,” said Surya Prasad Sedhai, chief investigation officer at Pathalaiya RIO. He told Republica that the office has already informed about its assessment to the company and instructed it to settle that sooner.

If the company does not comply, he said the office will take actions as per the law.

The RIO team had raided the office and godown of the MPL three months ago, assessed its stock, and taken its stock book, sales book and other documents in its control.

“The investigation found that there was a huge mismatch between its stock, sales and taxes it was paying to the government,” said Sedhai. The company was mainly found to be evading VAT and excise duty.

MPL had been producing Gutkha in pouch and exporting to countries like India, Afghanistan and UAE.

After the Indian government imposed ban on production of Gutkha in plastic pouch, Gutkha manufacturing firms have mushroomed in the southern bordering areas across Nepal. There are four Gutkha and Pan Masala manufacturers in Birgunj alone.

Source: Republica

VAT investigations bring more large tax payers into revenue net

KATHMANDU, Aug 17, 2012

The number of large taxpayers has increased by a whopping 40 percent over the last one year despite slowing economic activities in the country as the government stepped up revenue investigations discouraging manipulation of transactions by business firms through fake VAT billing.

During the fiscal year 2011/12, the government stepped up investigations into fake VAT billing rackets including 518 business organizations that were found to have evaded more than four billion rupees.

Large Tax Payers´ Office (LTO) stated that the number of large taxpayers increased to 722 by the end of the fiscal year 2011/12, up from 522 a year earlier. Of the total large taxpayers, 94 are from banking, 124 from non-agriculture, 29 from multinational companies, 106 from Public Enterprises (PEs), 262 from trading and 107 from agriculture sectors.

A senior office bearer of the Federation of Nepalese Chambers of Commerce and Industry said the number of large taxpayers has shot up significantly, especially those from trading business firms, as the government stepped up investigations on tax evasion following the revelation of 518 cases of fake VAT last year.

According to Madhu Kumar Marasini, deputy director general of Inland Revenue Department (IRD), 495 new cases of revenue evasion through fake VAT billing are under investigation besides 518 old cases.

“More and more firms are showing genuine VAT bills to maintain transparency in their business. It is a positive impact of ongoing investigation into fake VAT billing practices,” he said.

He also said strengthening US dollar vis-à-vis Nepali rupees as well as increasing volume of imports also pushed up the turnover of business firms over the period.

“The number of large taxpayers has shot up significantly along with their increasing contribution to total tax revenue,” said Ananda Dhakal, chief of LTO, at an interaction with large taxpayers on Thursday.

Out of the total tax revenue, contribution of large taxpayers increased to 52 percent during the fiscal year 2011/12 compared to 49 percent recorded the previous year. The government collected Rs 49.40 billion from large taxpayers during the year, up by 23 percent recorded earlier year.

Out of the total revenue collected from large taxpayers, 5 percent was contributed by agro-based, 47 percent by multinationals, 28.8 percent by banks and financial institutions, 4.1 percent by non-agriculture sector, 6.7 percent by trading and 7.2 percent by PEs.

Dhakal said a total Rs 19.61 billion was collected from the top ten tax payers, Rs 61.84 billion from top hundred taxpayers during the fiscal year 2011/12.
Business enterprises having an annual turnover of over Rs 250 million are designated as large tax payers.

Tax officials said business firms involved in the trading of basic essential commodities such as foods, clothing, petroleum products as well as dealers of construction materials, electronic goods are emerging as large taxpayers.

 

Source: Republica

Retailers asks govt to hike VAT threshold

KATHMANDU, AUG 15, 2012

Retailers have demanded hike in threshold of value added tax (VAT) to Rs 10 million from the existing Rs 2 million.

Arguing that annual transaction of even the small traders now crosses Rs 2 million, the retailers asked the government to review the VAT threshold that came into being some 15 years ago. The businesses below the Rs 2 million threshold should not come under VAT net.

During the 33th annual general meeting of Nepal Retailors’ Association on Tuesday, they also asked the government to address the problem related to discrepancies in value of goods, leaving the retailers with extra tax burden. “The issue of mismatch has been a major problem for us,” said President Pabitra Man Bajracharya. “We have already asked the Inland Revenue Department to address this problem.”

The retailers also complained about them being targeted by the government monitoring agencies for alleged adulteration and other misconducts.

He, however, said that the retailers would cooperate the government agencies in market inspection and monitoring.

Speaking on the occasion, Finance Minister Barsaman Pun praised retailers for creating self-employment opportunities in the countries. He said that despite introduction of partial budget this year, the government was ready to address the grievance of the private sector.

FNCCI Industry Committee Chairman Dinesh Joshi announced that the federation would be setting a separate cell to gather complaints and suggestions from traders and entrepreneurs.

President of Nepal Chamber of Commerce Suresh Kumar Basnet asked the government to create a business-friendly environment.

Source: The Kathmandu Post

Revenue collection picks up but still short of target

KATHMANDU, May 18, 2012

The government has mobilized Rs 190.08 billion in revenue over the first ten months of 2011/12, posting a growth of 19.6 percent in the same period last year.

As the revenue growth targeted for the fiscal year is 20 percent, the collection is short of the target. “But we are optimistic about attaining the annual target, which is about Rs 242 billion, as the rate of collections that  had slid through mid-January till mid-March has gone up now,” said Finance Secretary Krishna Hari Baskota.

The revenue collection at the end of six months, that is, by mid-January 2012, had touched Rs 111.03 billion, recording an increase of 21.6 percent over the revenue collected in the same period last year.

But the growth trend had suddenly nosedived to 17.4 percent by the end of the eighth month (that is, mid-March). In the ninth month, collections had grown by 18.1 percent and performance has further improved at the end of mid-May.

The breakdown of collections from different sources shows VAT contributed more than 31 percent in the total revenue collected so far. Collections from VAT over the first 10 months of 2011/12 stood at Rs 59.40 billion.

Income Tax was the second biggest contributor and generated Rs 39.35 billion during the period.

Likewise, collections from customs duty totaled at Rs 33.81 billion, while excise duty generated Rs 23.97 billion in revenue during the period. Collections from registration fee and vehicles tax remained less than target and stood at Rs 3.09 billion and Rs 3.18 billion respectively.

Likewise, non-tax sources, generated only around Rs 27.28 billion in revenue.

Source: Republica