Imports have 66pc share in VAT

KATHMANDU, NOV 19 -

Value Added Tax ( VAT ) collection from imports accounted for 66 percent of the total VAT collection in last fiscal year 2012-12, according to the Inland Revenue Department (IRD).

Out of total VAT collection of Rs 83.50 billion, Rs 55 billion came from imports.

The rest was collected from internal sources such as reverse charge, tourism, other services, contracts (construction business), sales and production.

Among the internal sources, the production sector had the highest contribution of Rs 9.77 billion, followed by sales, contracts, other services, tourism, and reverse charges.

The contribution of internal economic activities to VAT has been in the range of 34-37 percent over the last six years. In last fiscal year 2012-13, the contribution from internal activities went down to 34 percent from previous fiscal’s 36 percent.

IN the last six years, the highest share of VAT collected from internal sources was 37 percent in 2009-10, when the collection increased by Rs 6.80 billion.

IRD Director General Tankamani Sharma said the delays in the budget presentation and its endorsement in the last few years affected economic activities in the country from both the government and the private sector which resulted in relatively constant contribution of internal sources to VAT collection. “The delay in full budget presentation by nine months affected the construction sector and collection of VAT from that sector was severely affected,” said Sharma.

The government failed to award timely contracts for many projects last year and the same happened in previous years too when budget was not presently in time.

Sharma said reducing the share of imports in VAT collection is herculean task as a majority of sales activities depend on imported goods. “Even the production industries are dependent on imported raw materials, limiting the country’s capability of generating more VAT from internal activities,” said Sharma.

In last fiscal year, the rate of growth of VAT collection dwindled by 15.68 percent — down from 17.01 percent in the the previous year.

The growth rate of VAT surged to 33.15 percent in fiscal 2008-09 — up from previous fiscal’s 17 percent.

The growth rate was 38.34 percent in fiscal 2009-10 which nosedived to 12.22 percent the following year.

VAT Collection

Sources    FY 2008-9    FY 2009-10    FY 2010-11    FY 2011-12    FY 2012-13

VAT     Rs 39.70b    Rs 54.92b    Rs 61.69b    Rs72.18b    Rs 83.50b

Internal    Rs 13.91b    Rs 20.37b    Rs 22.38b    Rs 25.65b    Rs 28.49b

Imports    Rs 25.78b    Rs 34.54b    Rs 39.30b    Rs46.53b    Rs 55.01b

Internal/Imports    35:65    37:63    36:64    36:64    34:66

VAT growth rate (%)    33.15    38:34    12.33    17.01    15.68

Source: Inland Revenue Department/ The Kathmandu Post