2. Who Must Register for VAT?
Under the amended Rules, the general registration thresholds are:
| Nature of taxable business | Turnover exceeding the threshold |
| Goods | NPR 50 lakh |
| Services | NPR 30 lakh |
| Mixed transactions involving goods and services | NPR 30 lakh |
| Transport vehicle rental or transportation services | NPR 50 lakh |
The threshold generally considers turnover during the preceding 12 months, rather than only a completed fiscal year. It concerns business transactions, not net profit.
These thresholds are subject to special provisions requiring registration regardless of turnover. A business should therefore assess both its transaction value and its activities before concluding that registration is unnecessary.
3. Mandatory and Voluntary Registration
A business may be required to register even where its turnover remains below the general threshold. Separate requirements also apply to certain contracts and prescribed business activities.
Eligible businesses below the threshold may apply voluntarily. Once registered, they must comply with the applicable invoicing, return filing, payment and recordkeeping obligations.
4. When Should a Business Apply?
Where a business can reasonably anticipate that its turnover will exceed the applicable threshold, it should apply based on that anticipated position.
If turnover exceeds the threshold unexpectedly, Rule 7 of the Regulations requires an application within 30 days of exceeding it. Businesses subject to compulsory registration from the outset should complete registration before commencing the relevant taxable activities.
Regular monitoring of turnover helps prevent delayed registration and the resulting tax exposure.
5. Documents Required
The documents depend on the applicant’s legal structure and business activities. They generally include:
- Completed registration application;
- Firm, company or other business registration certificate;
- Existing business PAN details, where already registered;
- Citizenship certificate or passport of the proprietor or authorised person;
- Memorandum and Articles of Association, or partnership agreement, as applicable;
- Authority letter or corporate decision authorising the application, where applicable;
- Rental agreement or evidence of ownership of the business premises;
- Business location map, contact information and photographs, as required; and
- Details of business activities and estimated taxable turnover.
The tax office may request additional documents to verify the applicant’s identity, premises or proposed transactions.
6. Procedure for VAT Registration
Assess the registration requirement: Identify whether the proposed transactions are taxable, exempt or subject to special registration requirements.
Complete the online application: Access the Taxpayer Portal through the select the appropriate registration service and enter the business, ownership, address and transaction details. An existing PAN holder should apply to add VAT registration to the existing taxpayer record.
Obtain registration approval: Check the effective registration date, registered activities and assigned VAT return period. Online submission alone does not establish that VAT registration has been approved.
7. Obligations After Registration
A VAT-registered business must:
- Issue tax invoices in the prescribed format;
- Apply the correct VAT treatment to its supplies;
- Maintain purchase, sales and supporting transaction records;
- Submit VAT returns and pay the amount due within the prescribed period;
- Claim input tax credits only where legally permitted and supported by appropriate evidence; and
- Notify the tax office of relevant changes in its registered particulars.
VAT returns are generally monthly, although a different reporting period may apply to eligible taxpayers. The filing deadline is ordinarily 25 days after the applicable tax period ends. Registration continues to carry compliance obligations even during periods without transactions.
8. Non-Compliance and Cancellation
Failure to register when required can result in tax assessment, interest, additional charges and penalties under the Act. Delayed registration does not automatically remove liability for earlier taxable transactions.
Similarly, closing the business or falling below the threshold does not automatically cancel VAT registration. Cancellation requires an application, satisfaction of the statutory conditions and completion of outstanding compliance requirements.
Frequently Asked Questions
Is PAN registration the same as VAT registration?
No. PAN identifies the taxpayer, while VAT registration establishes the business’s registered status for VAT purposes. Obtaining a business PAN does not automatically complete VAT registration.
Must every company register for VAT?
No. The requirement depends on taxable activities, turnover and any special mandatory registration provisions.
Is the general service-sector threshold NPR 20 lakh or NPR 30 lakh?
The amended Regulations specify NPR 30 lakh for services and mixed goods-and-services transactions.
Can a small business register voluntarily?
Yes, subject to eligibility and the applicable legal requirements. Registration brings continuing VAT compliance obligations.
Does a business dealing exclusively in VAT-exempt supplies have to register because its turnover is high?
High turnover alone does not make exempt supplies taxable. The precise goods or services must be checked against the applicable exemption provisions.
Must a registered business submit returns when there are no sales?
Generally, yes. A nil return must be submitted for the applicable period while registration remains active.
How Alpha Law Associates Can Assist
Alpha Law Associates assists businesses with assessing VAT registration requirements, preparing registration documents, coordinating with tax authorities, reviewing compliance obligations and handling tax assessments and disputes.
Publication note: The thresholds above are supported by the amended Rules reviewed. The IRD lists the Finance Act, 2083, but its operative text was not accessible during this review; any changes under that Act should be confirmed before publication.