IRB to brick factories: Obtain VAT registration or face the music

OCT 10 -

The Inland Revenue Office (IRO) in Birgunj has directed brick factories in the district to obtain value added tax (VAT) registration by mid-October. The IRO set the deadline as about a dozen brick kilns have been disregarding its order to come under the VAT net.

Arjun Bhattarai, chief of the IRO in Birgunj, said they had given the factories one last chance to register even though they had been ignoring the IRO’s repeated notices. The government has also offered a VAT waiver if the factories registered themselves by the deadline. After the last date, they will not be allowed to conduct transactions without paying VAT. Bhattarai said they would take stern action against those ignoring the IRO’s directive.

Of around two dozen brick factories in Parsa, hardly 10 have come under the VAT net. Many of them are reported to have an annual turnover valued at more than Rs 2 million. The bricks produced here are sold in many cities in the country including the capital. The tax office has long been trying without success to bring these factories under the VAT net.

Meanwhile, brick factories in Kanchanpur district have started obtaining VAT registration. The entrepreneurs started signing up since Monday following an agreement between the government and the Federation of Bricks Entrepreneurs (FBE).

Director general of the Inland Revenue Department Tanka Mani Sharma handed over certificates to 15 factories that have been registered. Sharma added that the initiatives taken by the industry had helped to remove long-standing confusion.

According to him, they have been successful in bringing the factories aboard following a long discussion with the entrepreneurs. “It’s a big achievement for both the tax administration and the entrepreneurs,” he added.  

Brick manufacturers have been paying excise duty on their products, and they agreed to start paying VAT after the government said it would scrap the duty from this fiscal year. The government sweetened the deal by cancelling all back taxes.

Brick factories in the Kathmandu valley have been paying Rs 150,000 annually in excise duty while those outside the valley have been paying Rs 112,000 annually as manufacturing tax.

Tej Bahadur Chand, general secretary at the FBE, said all the brick factories in the country would be brought under VAT by mid-October. He added that they had informed all the manufacturers about this plan.

According to the FBE, there are more than 700 brick factories operating in the country.

Chand said brick prices would likely go up after the factories start paying VAT. He added that the price rise would match the extra tax burden.

Source: The Kathmandu Post