VAT increases total revenue collection

The Value Added Tax (VAT), which is considered as the back bone of the income tax in the country has been contributing remarkably to the government in its total revenue collection. It is imposed on the value added to goods and services consumed in Nepal or exported out of the country.

Experts said that the 13 percent VAT collection in the recent years had increased because of swell in consumerism, population and involvement of more people into business.

Even the government during the current fiscal year 2009/10 has targeted to collect Rs 51.56 billion revenue from VAT alone. The targeted amount is one third of the total revenue targeted for the year. The total revenue collection target of the Ministry of Finance (MoF) for this current fiscal year stands at Rs. 176.50 billion.

According to MoF, during the first month of the current fiscal year, the VAT has contributed Rs 4.34 billion in the total revenue collection of Rs 11.74 billion.  The revenue target for the first month was only Rs 9.78 billion including VAT target Rs 4.33 billion. The ministry also exceeded the target of excise duty as it collected Rs. 1.63 billion against the target of Rs. 1.03 billion.

Similarly, the excise duty collection target for the first month was Rs 1.03 billion but the collection exceeded and it posted Rs 1.63 billion collection.

Experts said that the trend of increase in collection of VAT, excise duty and even customs tax is also propped up by the reforms in the customs valuation and administration. But, the large amount of the collected revenue is spent on administrative costs.

Warning that the delay in the development works push the country in the same result as it had faced last year, they said that the government should speed up the development activities for the best use of the revenue. Last year the development budget could not be used as allocated because of lack of elected local bodies and absence of development projects.