KATHMANDU, Sept 9: The Inland Revenue Department (IRD), on Monday,  announced a ten percent tax rebate on Value Added Tax (VAT) levied on payments made to hotels, restaurants and bars via electronic medium. 

Issuing a notice on its website, the department has requested the concerned service-seekers, businesses and payment gateways to take part in the new scheme as a part of its drive to encourage tax-payment culture in the country. The department has also set five conditions for the taxpayers, businesses, and payment portals to gain the benefits of the new tax rebate.

Using the clause 1(B) of the Value Added Tax Act 1996, the department made a decision on Friday to select lodging businesses, restaurants and bars as three business fields where customers will be able to get a ten percent rebate on the VAT for payments made using electronic medium such as debit cards, credit cards, QR codes and mobile payments. 

According to clause 1(B) of section 25 of the VAT Act 1996, if a consumer makes payment of the goods or services selected by the department under the scheme via electronic medium, ten percent of the tax amount paid is supposed to be refunded as a cash incentive and deposited in their bank account. 

The three business types - lodging businesses, restaurant businesses and liquor serving businesses (bars) - have been selected as the first of many under the tax rebate scheme which was initially ideated in the budget of Fiscal Year 2019/20. 

Of the five requirements set by the department to facilitate the new scheme, two are targeted towards businesses and one each towards taxpayers, payment portals and financial institutions. 

The taxpayers who are registered for VAT and have been issued electronic invoices approved by the IRD can benefit from this tax refund. The three types of businesses selected by the department that accept payments via electronic payments are required to set up a system whereby the taxpayers can receive the rebate back into their accounts and display the information that it provides the VAT rebate. The department has also required online payment portals to update their system as per the Electronic Billing Work Procedure 2072 (Revised) in order to accommodate the VAT refund. Finally, the department has instructed banks and financial institutions to assist in facilitating transition into the new tax rebate system.

In January 2020, the department had announced a work procedure, according to which, consumers who make purchases through electronic means would be able to claim and instantly receive a 10 percent rebate on the 13 percent VAT they pay to the government. The tax concession scheme was first announced in the budget speech of the fiscal year 2019/20 as part of the government’s effort to promote electronic payment systems and shift toward a cashless economy.

 
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