Kathmandu. Through the Finance Act of the current financial year, the government made a provision – Value Added Tax (VAT) on potatoes and onions as well.
Potatoes and onions (except green) along with apples, avocados, kiwis, anseloos, shrills, cherries, strawberries, blackberries, halwabeeds have been VATed. After the government imposed VAT, the price of these goods directly increased by 13 percent, some took advantage of the opportunity and charged consumers even more than that.
There was widespread protest over the imposition of VAT on potatoes and onions, traders closed the Kalimati market for a few days. The then Finance Minister Dr. Prakasharan Mahat announced VAT on 167 items.
Due to the arrangements made by Mahat, vegetables, bananas, beans, beans, cabbage, coffee, raisins, frozen meat and fish also became expensive. The government came under heavy criticism.
On the one hand, they are facing criticism from consumers due to high prices, on the other hand, the government is struggling to fully implement VAT. Businessmen are also technically unable to take VAT credit.
For example, a VAT-registered wholesaler buys produce from a farmer. However, the farmer should not have given the bill. The wholesaler adds 13 percent VAT to the goods bought from the farmers and sells them.
For example, a wholesaler bought tomatoes from a farmer at the rate of 90 rupees per kilo. He took Rs 100 with a margin of Rs 10. Adding 13 percent VAT to this, the wholesaler sells tomatoes at the rate of Rs 113 per kg.
Here, the VAT credit of 13 rupees has become difficult for both the government and businessmen. Some government agencies have discussed with tax law experts to conclude that reforms are necessary to remove such difficulties.
The study that started with potato and onion vats has reached the level where the overall system needs to be improved.
“We have concluded that rather than looking at each purchase and sale, it is more appropriate to impose VAT on the basis of the overall transaction,” a member of the high-level tax system reform suggestion committee told Bizmandu, “It is not appropriate to increase it all at once.” It is our advice that the initial work can be done through agriculture.’
At present, there is a legal provision in which it is mandatory to register for VAT in case of transactions above 50 lakhs in case of goods and 20 lakhs in case of services. By canceling it, the committee has suggested that those doing business up to 30 million per year should be charged VAT only on the added value of purchase and sale.
The members of the committee say that if this suggestion is implemented, it will be easier in the VAT file. For example, a businessman bought tomatoes from a farmer at the rate of 90 rupees per kilo and he made it 100 rupees by keeping a margin of 10 rupees. According to the recommendations of the committee, 13 percent of the Rs 10 margin, i.e. one rupee 30 paise, should be paid to the government.
In the recommendation report, it has been said that the current threshold should be removed and only the agriculture which is produced in the mandatory and initial stages should be kept in the list of tax exemptions.
In this case, the government did not even have to see how much stock the businessmen have. He must also prepare the bill,” said a tax expert, “even though it is called VAT in a way, it is indirectly an income tax.”
In general, the government levies income tax on the income after deducting all expenses. According to those tax experts, if the committee’s recommendations are followed, the government will get 13 percent of the total income.
