VAT (Value Added Tax) filing is a quarterly obligation for every VAT-registered business in Nepal. Miss the deadline and you face penalties. File incorrectly and you risk IRD scrutiny. This step-by-step guide walks you through exactly what you need to do each quarter — from recording transactions to uploading your Annexes on the IRD portal.
Nepal VAT basics
- Rate: 13% (single rate — Nepal does not have multiple VAT rates like India’s GST)
- Who must register: Businesses with annual turnover above NPR 50 lakhs (NPR 5 million) in most sectors. Manufacturing and import businesses have lower thresholds.
- Filing frequency: Quarterly, aligned with the Nepali fiscal year (Shrawan to Ashad)
- Filing deadline: 25th of the month following the end of each quarter
- Where to file: IRD Taxpayer Portal — taxpayerportal
The four VAT quarters in the BS calendar
| Quarter | BS Months | Filing Deadline |
|---|---|---|
| Q1 | Shrawan – Ashwin (4th–6th month) | 25 Kartik |
| Q2 | Kartik – Poush (7th–9th month) | 25 Magh |
| Q3 | Magh – Chaitra (10th–12th month) | 25 Baishakh |
| Q4 | Baishakh – Ashad (1st–3rd month) | 25 Shrawan |
Note: Q4 feels counterintuitive — Baishakh starts the Nepali year, but it is the final quarter of the VAT filing cycle that runs Shrawan to Ashad.
Step 1: Ensure all transactions are recorded correctly
Before generating your VAT return, make sure every transaction in the quarter is entered in your accounting system:
- All sales invoices issued — mark VAT-applicable ones correctly
- All purchase bills received from suppliers — mark VAT-applicable ones correctly
- All credit notes and debit notes for the period
- Any cancelled or amended invoices
Each VAT-applicable sales invoice must include: your PAN, your VAT registration number, the customer’s name and address (for B2B invoices above NPR 10,000), item description, HS code, taxable amount, and VAT amount (13%).
Step 2: Generate your VAT return in your accounting software
In Udyot, go to Reports → Tax Reports → VAT Return, select the quarter, and the system generates:
- VAT Return Summary — Total Output VAT (on sales) minus Total Input VAT (on purchases) = Net VAT payable to IRD
- Annex 1 — Detailed list of all sales invoices issued in the quarter (buyer name, PAN, invoice number, date, taxable amount, VAT)
- Annex 2 — Detailed list of all purchase bills received (supplier name, PAN, bill number, date, taxable amount, VAT)
- Annex 3 — Credit and debit notes issued or received
Export all of these to Excel. IRD’s portal requires Excel format (XLS/XLSX) for Annex upload.
Step 3: Reconcile — output vs input VAT
Before filing, do a quick sanity check:
- Total Output VAT (Annex 1) should match the VAT Output (13%) ledger balance in your books for the quarter
- Total Input VAT (Annex 2) should match the VAT Input (13%) ledger balance
- Net VAT Payable = Output VAT − Input VAT
If there is a discrepancy, trace it back to individual invoices before filing. Common causes: a purchase bill entered without marking it as VAT-applicable, a sales invoice with the wrong VAT amount, or a credit note not properly linked.
Step 4: Pay the VAT
If Net VAT Payable is positive, pay the amount to IRD before the 25th deadline. IRD accepts payment via:
- Commercial bank tax counters (most major banks in Nepal)
- eSewa and other digital payment platforms linked to IRD
- Direct bank transfer to IRD’s designated accounts
Keep your payment receipt or bank transfer confirmation. You will need it during the return filing step.
Step 5: Upload to IRD taxpayer portal
- Log in to taxpayerportal.ird.gov.np with your PAN and password.
- Navigate to VAT Return Filing.
- Select the fiscal year and quarter.
- Upload Annex 1 (sales) and Annex 2 (purchases) Excel files.
- The portal auto-calculates the VAT summary from your Annexes. Verify the totals match your records.
- Enter the payment details (bank, date, amount).
- Submit the return. Download and save the acknowledgement receipt.
Input VAT credit carry-forward
If your Input VAT exceeds your Output VAT for a quarter (common for businesses that buy a lot and have lower sales in that quarter), you have an excess input tax credit. This automatically carries forward to offset Output VAT in subsequent quarters. You can also apply to IRD for a VAT refund if the excess is large and persistent.
Penalties for late filing
Under Nepal’s VAT Act, late filing attracts:
- Interest on the outstanding VAT amount at IRD’s applicable rate per month
- Additional penalty for non-filing (can be significant for repeated delays)
Set a calendar reminder for the 20th of the deadline month — give yourself 5 days buffer to catch errors before the 25th cutoff.
Tips for clean quarterly VAT filing
- Enter transactions as they happen — Don’t pile up purchase bills to enter at quarter-end. Daily or weekly entry keeps the workload manageable and catches errors early.
- Check supplier VAT registration — You can only claim Input VAT credit on purchases from VAT-registered suppliers. Verify your suppliers’ VAT numbers at ird.gov.np before claiming input credit.
- Separate VAT-exempt and taxable items — If your business sells both exempt and taxable goods, ensure your invoicing clearly separates them. Input VAT on exempt sales is not claimable.
- Keep all invoices — IRD can request original bills during an audit. Keep all purchase bills for at least 7 years.