1. Which registration are we discussing?
VAT Act sections 9 and 10: first identify the person making the supplies, classify those supplies, and then apply the registration rules. Registering a company, partnership or proprietorship establishes the business under its governing law. A PAN identifies the taxpayer. VAT registration adds the obligations and rights of a VAT-registered person; it is not automatically obtained merely by holding either of the other certificates.
Practical consequence: a PAN-only business cannot add an amount labelled VAT to its bills simply because its customer wants a tax invoice. Section 15 prohibits an unregistered person from collecting VAT or issuing a document showing VAT collection. Conversely, remaining unregistered does not erase a registration obligation that the law already imposes.
Exempt supplies are not the same as zero-rated supplies
Section 10(3): a person dealing only in goods or services exempt under Schedule 1 is not required to register under that provision. By contrast, a zero-rated supply under Schedule 2 remains within the taxable system. The absence of an output VAT charge is not enough to decide the registration or input-credit position.
Example: assume a business makes only supplies genuinely covered by the current exemption schedule, with annual value NPR 8 million. Its turnover alone does not remove the section 10(3) exemption. If it also starts an ordinary taxable service, the taxable activity must be examined separately. Do not extend the exemption from one activity to everything the business sells.
2. The ordinary domestic thresholds
Section 9 and rules 6-8: the small-business relief is subject to the following current thresholds. The relevant period is the preceding 12 months, not simply sales recorded since the latest Shrawan 1. The examples below assume ordinary taxable activities, values excluding VAT, and no separate registration trigger unless stated.
| Activity | Ordinary threshold | Important distinction |
|---|---|---|
| Goods | NPR 5,000,000 | Apply the business's relevant turnover measure, not gross profit. |
| Transport service or transport-vehicle rental within rule 6's specified category | NPR 5,000,000 | Check the actual service and exemption status. Every service associated with transport does not automatically fall in this category. |
| Services | NPR 3,000,000 | An ordinary consultancy does not use the goods threshold. |
| Mixed goods and services | NPR 3,000,000 | Genuine service income cannot be ignored merely because goods form the larger part of sales. |
Rule 6 describes relief up to the applicable amount; exceeding it is different from merely reaching it. A goods trader with a relevant measure of exactly NPR 5 million is not above that threshold. This conclusion does not protect the trader from an import trigger, a reasonably foreseeable excess or another applicable provision.
3. How to measure turnover correctly
Use the higher of purchases or sales
Rule 8: for registration purposes, determine the transaction amount using the higher of purchase value or sales value during the preceding 12 months. Keep records at the business premises supporting that calculation. Looking only at revenue can therefore produce the wrong result where a business has built up inventory.
Example: stock purchased before it is sold. A trader's relevant taxable-goods purchases are NPR 5.6 million and sales NPR 4.4 million over the preceding 12 months. The registration measure is NPR 5.6 million. Sales below NPR 5 million do not, by themselves, establish small-business relief.
Profit, bank balance and customer collections are not substitutes for this calculation. A bank loan is financing, not automatically a taxable sale. Reconcile the purchase and sales records rather than adding every cash deposit to turnover or subtracting operating expenses from it.
Do not restart the count at the financial year-end
Example: transactions across two income years. A goods trader has relevant external sales of NPR 2.7 million in the final six months of one year and NPR 2.6 million in the first six months of the next. Those consecutive 12 months total NPR 5.3 million. Neither financial year's smaller subtotal is a reason to disregard the rolling-period result. Relevant purchases may produce an even higher measure.
Apply the mixed-business threshold to genuine mixed activities
Example: a business has NPR 2.4 million of taxable equipment sales and NPR 800,000 from a genuinely separate taxable repair service during the relevant 12 months. Assume relevant purchases are lower. Combined sales are NPR 3.2 million, above the NPR 3 million mixed-business threshold. It is incorrect to test the goods against NPR 5 million and the repairs against NPR 3 million as though two independent businesses existed.
Classification depends on what is actually supplied. Separately describing a charge does not by itself resolve whether it is an independent service or part of another supply.
4. Branches, several firms and artificial splitting
IRD VAT Directives, chapter 2: branches and warehouses of the same taxable person are treated as one taxpayer. A natural person's multiple proprietorship businesses also require the appropriate single-taxpayer analysis. A different shop name, location or internal ledger does not automatically create a fresh threshold.
Example: one trader's Kathmandu branch makes NPR 2.8 million of external taxable-goods sales and its Pokhara branch NPR 2.6 million. The combined amount is NPR 5.4 million, assuming purchases do not produce a higher figure. Internal transfers between the branches should not be mistaken for additional customer sales and counted again.
Rule 6(1a): where the purchase, sale, stock and warehouse of supplies cannot be separated, the tax officer may treat them under one turnover limit and assess accordingly. This is not a rule that every separately incorporated related company is automatically one taxpayer. Establish genuine ownership, separate transactions and reliable records; do not rely on names alone to support separation.
5. When must the application be made?
| Situation | Core provision | Required approach |
|---|---|---|
| A business must register from commencement | Section 10(1); rule 3(2) | Apply before starting the relevant business, read with applicable small-business relief. |
| Turnover is reasonably expected to exceed the limit | Rule 7(1) | Apply explaining the expected excess. Do not wait automatically for recorded receipts to cross the limit. |
| An excess occurs unexpectedly | Rule 7(2) | Apply within 30 days from the crossing date. |
| An activity becomes taxable | Section 10(2) | Examine the 30-day requirement from taxation or commencement together with the applicable exemption and registration provisions. |
| The tax officer issues a registration direction | Section 5b; rule 7(6) | Respond to the written direction. A person claiming section 9 relief against a section 5b order must submit supporting evidence within 30 days of receiving it. |
Example: expected growth. A consultancy signs a firm one-year taxable-service contract worth NPR 3.6 million before beginning delivery. That evidence supports an expected excess over the NPR 3 million service threshold. Waiting until cash instalments total NPR 3 million ignores rule 7(1).
The 30-day application period for an unexpected excess is not a promise of a 30-day tax-free trading period. Establish the relevant registration and assessment dates under the applicable provisions. Equally, do not assume every sale made before an excess is automatically taxable retrospectively without examining the legal basis.
6. Cases requiring a separate registration check
Taxable-goods imports
Proviso to rule 6(1): the ordinary small-business relief is displaced for the covered import of taxable goods exceeding NPR 10,000 at one time. The proviso contains an exception for a person making exempt transactions who imports for their own use. It is not a blanket exemption for every small importer.
Example: a business imports ordinary taxable goods worth NPR 80,000 for resale. Annual turnover of only NPR 500,000 does not, by itself, avoid the import-related registration requirement. Paying VAT at customs and obtaining the appropriate business VAT registration are separate compliance questions.
Temporary trading and joint ventures
Section 10a and rule 7a: temporary exhibitions, fairs and similar taxable-business events have a separate registration route. A small stallholder should not assume that the ordinary annual threshold alone settles the position. The applicable temporary registration must be arranged before the event.
Section 10b: a joint venture formed by two or more persons to conduct taxable business for a specified period has its own registration requirement. The partners' individual VAT certificates do not automatically register the joint venture.
Non-residents and imported services
Section 10b1 and the relevant procedures govern specified non-resident digital and offline air-transport suppliers. Ordinary domestic thresholds should not be transferred mechanically to that regime. Separately, section 8(2) can require a recipient, registered or unregistered, to account for VAT on an imported taxable service. A business below the ordinary domestic registration threshold is not necessarily free from every VAT obligation.
7. Voluntary registration is a continuing commitment
Section 9 proviso and rule 6(2): an eligible small taxable business may seek voluntary registration. The section 9 proviso excludes taxpayers submitting presumptive returns under Income Tax Act section 4(4) from its express voluntary-registration route. Resolve the appropriate income-tax and VAT status rather than promising that both regimes can simply be retained together.
Voluntary registration may be commercially useful where customers require proper VAT invoices and eligible business inputs carry VAT. But it also brings output-tax, return and record obligations. It is not a certificate that can be used only for selected customers while the rest of the same taxable business remains outside VAT.
Price example: assume a registered business's ordinary taxable supply is subject to 13% VAT. A VAT-exclusive price of NPR 100,000 gives VAT of NPR 13,000 and an invoice total of NPR 113,000. If NPR 113,000 is already the agreed VAT-inclusive total, the VAT component is NPR 13,000, calculated as 113,000 x 13/113, not another 13% on top. Registration does not itself change the contractual price.
8. Application, supporting documents and approval
Rules 3-5 and Schedule 1: use the prescribed VAT application and the competent IRD office's current process. Existing PAN details should be reconciled; do not obtain duplicate identities merely to add VAT. IRD's current taxpayer-service guidance describes portal submission, supporting documents and verification, but a portal submission number is not itself a VAT registration certificate.
- Confirm the legal person, existing PAN, business registration and authorised applicant.
- Describe the actual activities, taxable/exempt classification, business locations and branches.
- Prepare the preceding-12-month purchase/sales schedule, forecasts or other evidence establishing the registration basis.
- Provide the prescribed ownership, partnership/company, identity and premises documents applicable to that applicant. Retain the submission acknowledgement.
- Respond to requested supporting information and obtain the approval/certificate and effective registration details before treating the application as complete.
Two different deadlines: rule 4 requires requested additional particulars/documents within seven days. Rule 5 provides for issue of the certificate within 30 days of the application where the officer's examination supports registration. The latter is an administrative processing provision, not an extra 30-day period in which the applicant may ignore an already-arisen obligation.
9. Check opening-stock credit immediately
Section 17(7) and rule 43: eligible goods held in stock at registration can support a pre-registration input-credit claim. Apply in the prescribed form within 15 days of registration, with the stock details, relevant tax invoices or import documents from up to one year before registration, and other required evidence. Approval is required; an unsupported number in the first return is not enough.
Example: eligible taxable resale goods remaining on hand cost NPR 100,000 plus documented VAT of NPR 13,000. Subject to the conditions and approval, NPR 13,000 may support the opening-stock claim. VAT on unrelated personal spending, goods already sold or every earlier operating expense cannot simply be added to that figure.
10. What continues after registration?
- Invoices and tax: issue the prescribed invoices and account for taxable supplies under their applicable rates and time-of-supply rules. Registration does not make every receipt taxable at 13%.
- Returns and payment: the ordinary monthly deadline is 25 days after the period ends. A properly authorised different filing cycle must be established separately. No transactions does not automatically mean no return.
- Records: keep the prescribed sales, purchase, invoice, stock and supporting records. Rule 23 requires six-year retention; unresolved proceedings or another law may require longer preservation.
- Certificate and changes: comply with certificate/display requirements. Section 10(7) requires notification of changed registration particulars within 15 days; rule 9 separately requires notice 15 days before a change of business location.
- Exit: a fall in turnover or closure does not itself cancel registration. Follow section 11 and determine the resulting filing and closing-stock treatment.
Failure to register: section 20(1)(g) permits assessment where a liable person trades unregistered. Section 29(1)(a) provides a NPR 20,000 fine for each covered occurrence; it is not a payment that buys exemption from registration. Tax, interest, additional charges and other applicable contraventions must be considered separately.
11. Amendments, IRD notices and Supreme Court guidance
Do not use an old service limit or a repealed procurement rule
The 2080 VAT Directives reproduce a NPR 2 million service/mixed threshold. The later Rules consolidation states NPR 3 million. For the current period, use the amended Rules rather than retaining an older number merely because it appears in an official explanatory document. A historical year's position requires the amendment and commencement applicable to that year.
28th Rules amendment, 2083: rule 1(2) makes it effective immediately; the Gazette is dated 2083/02/15. Its rule 8 repeals former rule 6a and Schedule 9. The old rule 6a annual NPR 500,000 contract/consultancy procurement condition must therefore not be repeated as a surviving VAT registration rule for the current period. Separate procurement-law or tender requirements still need their own examination.
Finance Act 2083: its VAT amendments and replacement exemption schedule must also be read when classifying supplies. Do not treat a business category as permanently exempt because it appeared in an older schedule, or infer a new ordinary registration threshold from the budget speech alone.
The IRD registration notice is read with the whole law
IRD's notice published on 11 Asar 2080 repeats section 10(2)'s 30-day registration requirement when a business activity becomes taxable or starts. It does not, by itself, replace section 9's small-business framework, section 10(3)'s exclusively exempt-business rule or subsequent amendments. Use notices and circulars within their legal authority, subject matter and effective period.
What the Supreme Court decision establishes, and what it does not
Chaturgun Pandit v. Council of Ministers Secretariat and others, Decision 7071, decided 2058/11/16: paragraph 12 explains that a departmental circular cannot narrow or neutralise legislation without the required delegated authority. The dispute concerned historical buyer-identification/invoicing provisions. The writ was dismissed because the claimed constitutional injury was not factually established.
The useful principle is legal hierarchy, not an exemption from today's registration rules. The decision's historical turnover figures are not current thresholds, and it should not be cited as deciding the present NPR 5 million/NPR 3 million limits or every compulsory-registration case.
12. A practical registration decision file
Keep one concise file recording: the taxable person and activities; current exemption/rate classification; the rolling 12-month purchase and sales figures; the applicable threshold; expected growth; any import, event or joint-venture trigger; and the application/approval dates. Add relevant notices, correspondence and the opening-stock claim where applicable. That file should show why registration is or is not required, not merely contain a copied threshold table.
Scope: ordinary domestic business registration for FY 2083/84, with brief identification of separate routes. Examples use the stated assumptions. A disputed classification, historic assessment, non-resident structure or specialised sector requires its own analysis.
Government References
- Inland Revenue Department: Value Added Tax Act, 2052, consolidated through Finance Act 2082.Read with Finance Act 2083. Sections 5b, 8-11, 14-20 and 29; Schedules 1-2. In particular: small businesses, registration, separate registration routes, unregistered collection, opening stock and assessment.
- Inland Revenue Department: VAT Rules, 2053, through the twenty-seventh amendment.Rules 3-9, 23, 26 and 43. Rules 6-8 cover ordinary limits, expected/unexpected excess and the higher-of-purchases-or-sales measure. Read the consolidation with the following 2083 amendment.
- Department of Printing: VAT (Twenty-Eighth Amendment) Rules, 2083, Gazette dated 2083/02/15.Original Gazette PDF pages 2-3: amendment rule 1(2), immediate commencement; rule 8, repeal of former rule 6a and Schedule 9. Other changes include records, filing-period wording and input restrictions.
- Inland Revenue Department: Finance Act 2083, published 2083/03/30.Section 55: VAT Act amendments, including rate provisions and revised exemption schedule. Registration analysis must use the current supply classification.
- Inland Revenue Department: VAT Directives, 2069, third amendment 2080.Chapters 2-3: taxable persons, branches, multiple activities and registration. Older threshold/procurement passages are used only subject to subsequent legislation, not as unchanged current law.
- Inland Revenue Department: urgent VAT registration notice, published 11 Asar 2080.The attached one-page notice repeats section 10(2)'s 30-day requirement. It is read with the statutory reliefs and subsequent amendments.
- Inland Revenue Department: Taxpayer Service and Registration, published 26 Ashwin 2083.Current general registration, supporting-document, portal and verification guidance. This service summary does not replace the VAT Act, Rules or a case-specific approval.
- Supreme Court of Nepal: Chaturgun Pandit case, Decision 7071.Special bench; writ 2058/54; decision 2058/11/16; Nepal Law Reports 2059. Paragraphs 11-13: historical registration/invoicing context, limits of circulars and dismissal of the writ. Not authority for today's numerical thresholds.