Taxmen defining tablet PCs as mobile sets, refunding VAT: OAG

Published On: April 14, 2017 12:35 AM NPT By: Rudra Pangeni  | @rudrapang

KATHMANDU, April 14: Tablet personal computers (PCs) are different from smartphones. But tax officials have defined tablet PCs as smartphones and given value added tax (VAT) reimbursement to importers. “

"Tax offices reimbursed 50 percent of VAT levied on smartphones to six tablet PC importers in fiscal year 2015/16. Rs 6.5 million reimbursed to the importers must be recovere”," the 54th Audit Report unveiled by the Office of Auditor General (OAG) on Wednesday states.

Large Taxpayer Office released Rs 5.6 million to a firm that imported 5,319 units of tablet PCs in 2015/16, while Area No. 1 Office (Babarmahal) of Inland Revenue Department reimbursed Rs 900,000 to five other importers.

But the OAG has not specified name of such companies.

As Financial Act, 2072 has no provision for such reimbursement, the OAG has recommended to the concerned government agency to look into the case and recover the amount to the state treasury.

The law had provisioned 50 percent VAT reimbursement for mobile phones only in 2015/16. It has been reduced to 40 percent in the current fiscal year. 

This is the fourth year that the government has continued reimbursement of VAT, despite the OAG's recommendation to withdraw the facility“ "We have repeatedly asked the government to discontinue VAT reimbursement for mobile phone importers. The facility has already lost rationale as smuggling of mobile phones has already been controlle”," Ramu Prasad Dotel, the spokesperson for OAG, told Republica. 

The government does not levy any tax on import of mobile sets. The government had introduced the VAT reimbursement facility in 2000s to control smuggling of mobile sets.

The High-Level Tax System Review Commission instituted in 2015 had also recommended stopping such VAT reimbursement. But the government is not taking the recommendation seriously, OAG officials say. 

The government released Rs 752 million in VAT refund to seven different mobile phone importers in 2015/16. It had reimbursed Rs 650 million to such importers in 2014/15, according to the report.

Likewise, the OAG has also asked government to revisit 50 percent VAT refund provided for importers of raw materials of cooking oil and ghee. The report states that importers were misusing the facility by importing refined oil instead of raw materials. They only package the products here with no value addition, it said.

The government released Rs 1.2 billion in VAT refund for 19 large taxpayers in 2015/16. 

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