Govt mulls mandatory electronic billing

The government of Nepal is soon to require all industrial and trading firms across the country to switch to electronic billing, something which will mechanize all VAT-related transactions and help the revenue administration trace them.

The new arrangement has been worked out in a bid to tackle a VAT bill racket that is assaulting the very heart of the country´s tax system.

Under this arrangement, large taxpayers will need to adopt a web-based computer billing system. Medium and smaller taxpayers too will need to arrange for fiscal printers and cash register machines respectively and compulsorily input all their transactions into them.

“The new policy changes will be effected through the upcoming budget,” a highly placed government source told Republica.

The change is being effected as per the recommendations of the Inland Revenue Department (IRD), whose recent crackdown on 32 firms involved in forging VAT receipts revealed that the racket is much wider in scale and is present in almost the entire business sector.

IRD found that under the racket known the world over as the ´case of the missing vendor´, firms including big corporate houses were either buying genuine VAT receipts from smaller firms or buying printed receipts of some other registered traders to create fake transactions in order to evade tax. Some of them even claimed VAT refund on the basis of the fake VAT receipts and customs documents, thereby siphoning off funds from the national exchequer without having contributed even a penny into it.

The government has admitted that the racket, which has so far been found to involve around Rs 10 billion (well over $138 million) and has inflicted revenue losses of over Rs 4 billion, flourished because it did not mechanize the VAT system. In the absence of this, the tax administration failed to keep track of the vendors, while enabling entrepreneurs to create fake transactions.

“To our reckoning, we must not delay enforcement of an electronic billing system,” the source said.

Under the new practice, web-based billing will directly link transactions of large taxpayers with the the system at the Inland Revenue Department (IRD). This means whenever they issue a bill to any party, the transaction will be automatically recorded in the main server at IRD.

The fiscal printers, like the ones used by hotels and service entities, will have a device that records all transactions carried out over the span of a year. Cash register machines will also have a similar backup device, registering all transactions carried out by small taxpayers.

“Because the taxpayers will not be able to manipulate transactions recorded in the system, we will be able to track down the vendors and cross-match their transactions,” the source said.

This is not the first time the government is talking about web-based computer billing, fiscal printers and cash register machines. The existing tax law encourages taxpayers to install such a system voluntarily and even allows them to deduct the cost incurred from their profits, thereby freeing them from any additional financial burden. However, only a handful of business firms bothered to implement the system.

Given their importance in plugging leakage, particularly of VAT, which has been reeling due to under-invoicing and lack of receipts, the government four years ago had announced it was making electronic billing compulsory. However, this never came into implementation.

Source: Republica Business & Economy



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1 Comment


  1. It’s something required for a long time. The tax payers will have convenience to pay this way while the government will get more revenue.

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