May 20: The government has decided not to implement multiple rates in Value Added Tax (VAT) in the upcoming fiscal year. “Multiple rates still need adequate study and research. The countries that have earlier implemented multiple rates are now adopting single rate. Thus multiple rates will not be implemented in VAT,” says Laxman Aryal Joint Secretary in Revenue Management Division for Ministry of Finance. In the recent years, umbrella organisations of various commercial associations along with industrialists and entrepreneurs were suggesting for multiple rates system in VAT. However, the government is preparing to formulate budget and revenue policies in its own terms neglecting private sectors’ demands and suggestions.

Pashupati Murarka, President of Federation of Nepalese Chamber of Commerce and Industries (FNCCI) says that government should address private sectors’ demand by implementing multiple rates system in VAT from upcoming FY. He says, “Rate should be set as per the goods. All goods should not be rated equivalent. Our goods should be able to compete with foreign goods.” Additionally, he advised to continue VAT refund policy in raw materials of Ghee, Plain Flour, Oil, Mobile and other industrial production.

Similarly, Confederation of Nepalese Industries (CNI) has demanded the government to reduce VAT rate to 10 percent from coming FY. Moreover, Hari Bhakta Sharma, President of CNI suggests government to continue VAT subsidies in mobile, edible oil, flour and educational items.   He says, “If government wants to provide facilities to industrialists and entrepreneurs, the government should provide VAT exemption in such essential goods. Furthermore, tax payer should be able to pay tax through one door system.”  He demands of Rs 5 million threshold in VAT for service sector. According to Value Added Tax Act 2054, industrialists and entrepreneurs having turnover of Rs 2 million for trading sector and of Rs 1 million for service sector are required to register in VAT.

Additionally, CNI demands of increasing tax limit for personal and couples’ income as per income tax Act 2058, as price inflation has heighten in recent time. The confederation has recommended limiting taxable income of Rs 400,000 for a person and Rs 600,000 for a couple. The government might show flexibility in this regard. According to Financial Act 2072, individual earning Rs 250,000 and couples earning Rs 300,000 annually from employment will be exempted from tax. Natural person and couples earning such income are required to pay one percent social security tax only.  “Tax payer who has paid capital gain tax, if failed to submit income statement then the capital gain tax should be documented as tax,” he suggested.