Ministry smells rat in rising VAT credit

KATHMANDU, DEC 11: 

Finance Ministry has directed revenue administration to enhance its vigilance in claims by business firms for Value Added Tax (VAT) refund.

The current figures reveal that there is imbalance between VAT debit and credit, the ministry said, adding that the VAT credit figure stands at 49 per cent compared to 33 per cent VAT debit, currently.

The state has to refund the VAT amount to businesses, if their claim of VAT credit surpasses the amount of VAT debit, according to deputy director general at the Inland Revenue Department Ram Sharan Pudasaini.

An increase in VAT credit is not bad in itself, he said. “However, chances of missing-trader-fraud along with others fraud could not be avoided when credit claims increase.”

The department will start monitoring of taxpayers to track whether there is chances of fraud or not, according to him.

Inland Revenue Department’s vigilance is a must in a country like Nepal where more than 30 per cent VAT-registered firms are found to be non-filers though the claim of VAT refund is not negative at all, the ministry said.

An increase in VAT credit also indicates better economic performance, Pudasaini said, adding that increase in capital investment, rise in the value of the dollar, increase in import and consumption, and other reasons could also play role in the increase of VAT credit.

However, the increasing credit figure also could be due to rising fraud as well, he further said. The department should keep checking the possibility of fraud since the country has already witnessed a huge VAT scam, where the Inland Revenue Department had brought 518 firms — including big business firms — under its scanner and found them guilty, Pudasaini added.

“The credit figure had gone up at the time, when the department uncovered the multi-billion VAT fraud scam,” according to him.

Meanwhile, the zero credit has also become problem to the tax administration. Around 18 per cent firms have zero credit or nil transaction at present, Pudasaini said, adding that the department will investigate the actual status of these firms to check whether they have not carried out any transaction or not.

Source: THT