VAT 99-2/final - empcom.gov.in

More documents

Recommendations

Info

Vol. 10 No. 2, March/April 1999 VAT MONITOR 65 finance from the Dutch Government, the International Bureau of Fiscal Documentation (IBFD) organized a 3week training programme in Amsterdam beginning on 18 November 1996. IBFD also organized another training programme of 2 weeks in Kathmandu from 30 November to 11 December 1998. Training has been provided in the field of computerization as well. First computer training was provided to data entry clerks on the use of the registration module. Training has also been provided on the manual procedures needed for the operation of a computer system. VAT officials were also trained on batching procedures, with emphasis on the importance of registration controls. Now computer training is being provided on various aspects of VAT application. 3.5. Computerization An attempt has been made to set up a computerized VAT administration. Initially, it was planned to computerize the whole VAT administration in one go. But this was changed at a later date due to the budget constraints and other problems, including personnel problems. It was decided to computerize the VAT Department first and extend it to the VAT offices in a phased manner. A local area network (LAN) has been established in the Department and is running well. Several modules such as registration, returns, payments and refunds were developed before the introduction of VAT. However, only the registration module was tested before the introduction of VAT. Other modules relating to returns, payments, refunds, computerized accounting systems, computer generated assessments for taxpayers that failed to file tax returns, and computer selection of taxpayers for verification and audit were tested after the introduction of VAT and a few changes have been made and a few facilities created. Such changes were expected when this new system was introduced and implemented. Under the centralized data processing system, documents such as application for VAT registration, VAT returns, payment vouchers, etc. are received first by the VAT offices and batched to the VAT Department. Data entry and processing is done at the computer section in the VAT Department and necessary printouts are sent to the VAT offices. Now the VAT Department is fully computerized regarding registration, returns, collection, payment, audit and penalties. The computer system provides such outputs as registration certificates, a registrants’ list, a non-filers list, posting reports, outstanding reports, audit trial reports, refund claims, revenue reports, suspended reports, and closing reports. These are generated by the taxpayer and the VAT office. The VAT administration has now gained some experience in computerization at Department level. After this experience, attempts have been made to computerize VAT offices. Decentralized data entry and processing began on an experimental basis in September 1998. First Lalitpur VAT office was selected. The reasons for the selection of Lalitpur office was that it was easier to monitor it closely by the computer experts located at the VAT Department since it is only a few hundred meters away from the VAT Department. For similar reasons, Kathmandu VAT office was selected next. These two offices constitute about 47% of total taxpayers and they collect more than half of total domestic VAT revenue. The decentralized data processing has been running smoothly in both of these offices. In the second phase, VAT offices located outside the Kathmandu Valley were selected for decentralized data entry and processing systems and it was planned to computerize all VAT offices by the end of 1998. Unlike the centralized system, VAT offices will not batch such documents as applications for registration, VAT returns, payment vouchers, etc. for the VAT Department under the decentralized system. Instead, VAT offices will enter data themselves and transmit it to the Department, which in turn will validate the batches transmitted before posting to taxpayers accounts. The decentralized data processing system is expected to save time and provide data on time since the computerization will be done at the VAT offices, which are much closer to the taxpayers. It will be easier for the tax officers to correct errors since they can obtain data by telephoning or visiting the concerned taxpayers under their area of jurisdiction. It will help to give more correct information on time since it will save the postal time that takes 2 weeks or more in some cases. It is also expected to improve taxpayer services and help accelerate collection and reporting systems. 3.6. Manual system © 1999 International Bureau of Fiscal Documentation A manual system was set up in all VAT offices to keep track of at least large taxpayers. The purposes of this manual system are: – to make the tax officers familiar with VAT procedures; – to compare output from the computer with calculations made manually; – to ensure that large taxpayers submit returns and pay VAT. The tax offices have been asked to inform the Department in case of differences between manual calculations and computer printouts. This information was used to analyse the function of the computer system. The Department selected companies to be handled under the manual system parallel to the computer system. Total taxpayers selected for the manual system covered 6% of the total number of registered businesses and 20% of total transactional value.
66 VAT MONITOR Vol. 10 No. 2, March/April 1999 4. VAT IMPLEMENTATION The VAT Act came into force on 16 November 1997 13 when the Sales Tax Act 1966 14 was repealed. The import/manufacturing level sales tax was converted into VAT on this date. 4.1. Registration As per the gazette notification of the government, all sales tax registered firms15 were supposed to be converted into VAT registrants by 16 November 1997. Other firms, which were not registered under the sales tax, were required to be registered within 90 days from 16 November 1997. A number of taxpayers registered under the sales taxes were found not to have converted to VAT by 16 November 1997. VAT officers visited some of these. Some of them assumed that since they were already in the tax net, they would be automatically converted to VAT. A list of these firms was sent to each VAT office for further action. A few more firms were converted into VAT registrants after action by the VAT offices. The trend of the number of VAT registrants is given in Table 2. As shown in this table, the total number of VAT registrants on 9 December 1997 was 2,320. The number increased to 2,596 on 2 January 1998, 2,870 on 2 February 1998 and 3,025 on 13 February 1998, the last date for compulsory registration for VAT. Despite the strong opposition to VAT from the business community, the number of VAT registrants increased gradually, reaching about 5,000 by the end of the fiscal year 1997/98 (i.e. 15 July 1998) and around 6,500 by the end of 1998. Table 2: Trend of VAT registrants Date Number Change percentage 09.12.97 2320 – 02.01.98 2596 11.90 02.02.98 2870 9.55 03.03.98 3543 23.45 02.04.98 4290 21.08 17.05.98 4699 9.53 17.08.98 5618 13.29 18.09.98 5920 5.38 Source: VAT Department The VAT administration has already gained experience in the field of registration. The registration process has been running smoothly at both VAT offices and the VAT Department. The computer module dealing with registration has been working well. An updated list of VAT registrants is sent to each VAT office every month. 4.2. Return submission/Non-filers The first VAT return was to be submitted on 9 January 1998. A large number of taxpayers since then have submitted returns by the due date. Until now, the number of credit returns has been higher than the debit returns. VAT returns are being scrutinized on a regular basis. Not all taxpayers, however, submit returns on time. The status of non-filers is given in Table 3. About 12% of registrants have been non-filers in the recent months. Non-filers are mainly small taxpayers, particularly small contractors, whose turnover is lower than the threshold but have been registered for VAT due to the requirement to submit a copy of the VAT registration certificate in order to bid for government contracts. These non-filers have been reminded to file their returns and have been visited since February 1998. Table 3: Status of non-filers Month Number mid-Nov. to mid-Dec. 1997 560 mid-Dec. to mid-Jan. 1998 709 mid-Jan. to mid-Feb. 1998 603 mid-Feb. to mid-Mar. 1998 843 mid-Mar. to mid-Apr. 1998 535 mid-Apr. to mid-May 1998 771 mid-May to mid-June 1998 579 mid-June to mid-July 1998 630 mid-July to mid-Aug. 1998 740 Source: VAT Department 4.3. Revenue position © 1999 International Bureau of Fiscal Documentation VAT is expected to generate NPR 9,420 million in 1998/99. Out of this NPR 6,500 million is expected to be collected on import at customs points and the rest from VAT registrants. This means that almost 70% of total VAT revenue will be collected from imports and about 30% from VAT registrants. The trend of VAT revenue collected from VAT registrants in various months of fiscal year 1997/98 and the first few months of fiscal year 1998/99 is given in Table 4. 13. 1 Marg 2054 according to the Nepali calendar. 14. The Hotel Tax Act 2018, the Contract Tax Act 2023, and the Entertainment Tax Act 2016 were also repealed on 16 November 1997. The entertainment tax, however, continued to be levied under the Finance Act 1997 even after the introduction of VAT and the abolition of the Entertainment Tax Act. Similarly, as per the Finance Act 1997, contractors were given an option to pay the contract tax or to come under the VAT regime in the case of contract signed before the introduction of VAT. 15. In the middle of November 1997, 2045 firms were registered for the sales tax.
Page 1 and 2: 60 VAT MONITOR Vol. 10 No. 2, March
Page 5: 64 VAT MONITOR Vol. 10 No. 2, March

VAT 99-2/final - empcom.gov.in

Create successful ePaper yourself

Delete template?

Save as template?