Value Added Tax Quiz

VAT in Nepal is governed by the VAT Act of:

• A) 2052 ✔
• B) 2058
• C) 2063
• D) 2076

Why: VAT in Nepal is governed by the Value Added Tax Act, 2052 and the VAT Rules, 2053.

The standard VAT rate in Nepal is:

• A) 10%
• B) 13% ✔
• C) 15%
• D) 18%

Why: The standard VAT rate in Nepal is 13%.

VAT is administered by the:

• A) Inland Revenue Department ✔
• B) FCGO
• C) NRB
• D) Customs only

Why: VAT is administered by the Inland Revenue Department (IRD); customs collects VAT on imports.

Registration limit for a business selling only goods:

• A) Rs 20 lakh
• B) Rs 30 lakh
• C) Rs 50 lakh ✔
• D) Rs 1 crore

Why: A business selling only goods must register for VAT when its annual turnover exceeds Rs 50 lakh.

Registration limit for service businesses (from FY 2081/82):

• A) Rs 20 lakh
• B) Rs 30 lakh ✔
• C) Rs 50 lakh
• D) Rs 10 lakh

Why: From FY 2081/82, service and mixed businesses must register for VAT when annual turnover exceeds Rs 30 lakh.

A business must apply for VAT registration within how many days of crossing the limit?

• A) 7
• B) 15
• C) 30 ✔
• D) 60

Why: A business must apply for VAT registration within 30 days of crossing the threshold.

VAT returns are filed:

• A) Yearly only
• B) Monthly within 25 days after month end ✔
• C) Daily
• D) Every 5 years

Why: VAT returns are filed monthly, within 25 days after the end of the month.

VAT records must be kept for:

• A) 1 year
• B) 3 years
• C) 6 years ✔
• D) 10 years

Why: VAT records and invoices must be kept for 6 years.

Exports are:

• A) Exempt
• B) Zero-rated ✔
• C) Taxed at 13%
• D) Banned

Why: Exports are zero-rated: VAT is 0% and the exporter can still claim input tax credit.

Education services are usually:

• A) Exempt ✔
• B) Zero-rated
• C) Taxed at 26%
• D) Taxed at 13% always

Why: Education services are exempt from VAT under the Act's schedule.

The main difference of zero-rated from exempt is:

• A) Input credit is allowed ✔
• B) Higher tax
• C) No invoice needed
• D) Not legal

Why: Zero-rated supplies allow input tax credit. Exempt supplies do not.

Government offices withhold what share of VAT on contract payments?

• A) 25%
• B) 50% ✔
• C) 75%
• D) 100%

Why: Government offices withhold 50% of the VAT on contract payments and deposit it directly.

VAT collected is shared with provinces and local levels as:

• A) 70/15/15 ✔
• B) 50/25/25
• C) 60/20/20
• D) 80/10/10

Why: VAT and internal excise go into the divisible fund, shared 70% federal, 15% provinces and 15% local levels.

Before VAT registration, a business needs a:

• A) PAN ✔
• B) Passport
• C) Citizenship of another country
• D) Driving licence

Why: A business must have a PAN (Permanent Account Number) before it can register for VAT.

VAT is a/an:

• A) Direct tax
• B) Indirect tax ✔
• C) Property tax
• D) Land revenue

Why: VAT is an indirect tax: the seller collects it, but the consumer finally bears it.

VAT stands for:

• A) Value Added Tax ✔
• B) Variable Asset Tax
• C) Value Assessment Tariff
• D) Vehicle Annual Tax

Why: VAT stands for Value Added Tax.

The law on VAT in Nepal is the Value Added Tax Act of:

• A) 2052 BS ✔
• B) 2058 BS
• C) 2045 BS
• D) 2063 BS

Why: The law is the Value Added Tax Act, 2052 BS.

VAT was implemented in Nepal on:

• A) 1 Mangsir 2054 ✔
• B) 1 Shrawan 2052
• C) 1 Baisakh 2060
• D) 1 Magh 2050

Why: VAT came into force in Nepal on 1 Mangsir 2054 (16 November 1997), replacing sales tax.

The VAT rate when it started in Nepal was:

• A) 10% ✔
• B) 13%
• C) 15%
• D) 5%

Why: When VAT started in 2054 BS, the rate was 10%.

The present standard VAT rate in Nepal is:

• A) 13% ✔
• B) 10%
• C) 15%
• D) 18%

Why: The present standard rate is 13%.

VAT is a type of:

• A) Indirect tax ✔
• B) Direct tax
• C) Income tax
• D) Property tax

Why: VAT is an indirect tax on consumption.

VAT in Nepal is administered by the:

• A) Inland Revenue Department ✔
• B) Department of Customs only
• C) Nepal Rastra Bank
• D) Ministry of Home Affairs

Why: The Inland Revenue Department administers VAT.

VAT on imported goods is collected at the:

• A) Customs point ✔
• B) Ward office
• C) Bank only
• D) Police station

Why: VAT on imports is collected at the customs point together with customs duty.

The tax a business pays on its purchases is called:

• A) Input tax ✔
• B) Output tax
• C) Income tax
• D) Excise

Why: VAT a business pays on its purchases is input tax.

The tax a business charges on its sales is called:

• A) Output tax ✔
• B) Input tax
• C) Customs duty
• D) Road tax

Why: VAT a business charges on its sales is output tax.

VAT payable to the government is:

• A) Output tax minus input tax ✔
• B) Input tax plus output tax
• C) Only input tax
• D) Sales minus purchases

Why: VAT payable = output tax − input tax.

Deducting VAT paid on purchases from VAT collected on sales is called:

• A) Input tax credit ✔
• B) Tax holiday
• C) Tax evasion
• D) Double taxation

Why: Deducting input VAT from output VAT is called input tax credit.

Goods on which no VAT is charged and no input credit is allowed are:

• A) Exempt goods ✔
• B) Zero-rated goods
• C) Luxury goods
• D) Imported goods

Why: Exempt goods carry no VAT and the seller cannot claim input credit on related purchases.

Goods taxed at 0% where input credit is still allowed are:

• A) Zero-rated goods ✔
• B) Exempt goods
• C) Standard-rated goods
• D) Prohibited goods

Why: Zero-rated goods are taxed at 0%, and input credit is still allowed.

Exports from Nepal are generally:

• A) Zero-rated ✔
• B) Taxed at 13%
• C) Taxed at 26%
• D) Banned

Why: Exports are zero-rated to keep Nepali goods competitive abroad.

Which is usually VAT-exempt in Nepal?

• A) Basic agricultural products and education services ✔
• B) Cars
• C) Mobile phones
• D) Cosmetics

Why: Basic agricultural products, education and health services are usually VAT-exempt.

A VAT-registered business must issue a:

• A) Tax invoice ✔
• B) Citizenship card
• C) Darta slip
• D) Tender notice

Why: A VAT-registered business must issue a tax invoice showing the VAT charged.

Every taxpayer in Nepal is identified by a:

• A) PAN (Permanent Account Number) ✔
• B) NID only
• C) Passport number
• D) Phone number

Why: Every taxpayer in Nepal is identified by a PAN (Permanent Account Number).

A PAN in Nepal has how many digits?

• A) 9 ✔
• B) 10
• C) 12
• D) 7

Why: A PAN in Nepal has 9 digits.

The monthly VAT return must be filed within how many days after the end of the tax period?

• A) 25 days ✔
• B) 15 days
• C) 35 days
• D) 60 days

Why: The monthly VAT return is due within 25 days after the end of the tax period.

VAT registration is compulsory for goods sellers whose annual turnover exceeds:

• A) Rs 50 lakh ✔
• B) Rs 5 lakh
• C) Rs 1 crore
• D) Rs 10 lakh

Why: Goods sellers must register when annual turnover exceeds Rs 50 lakh.

VAT registration is compulsory for service providers whose annual turnover exceeds:

• A) Rs 30 lakh ✔
• B) Rs 50 lakh
• C) Rs 2 lakh
• D) Rs 1 crore

Why: Since FY 2081/82, service providers must register for VAT when annual turnover exceeds Rs 30 lakh (earlier it was Rs 20 lakh).

VAT is finally borne by the:

• A) Final consumer ✔
• B) Manufacturer
• C) Wholesaler
• D) Government

Why: VAT is passed down the chain and finally borne by the final consumer.

VAT is collected at:

• A) Each stage of production and distribution ✔
• B) Only at the factory
• C) Only at retail
• D) Only at import

Why: VAT is collected at each stage of production and distribution, on the value added at that stage.

Hiding sales to pay less VAT is:

• A) Tax evasion ✔
• B) Tax planning
• C) Tax refund
• D) Input credit

Why: Hiding sales to pay less VAT is tax evasion, which is illegal.

Excise duty is different from VAT because excise is charged on:

• A) Specific goods like alcohol and tobacco ✔
• B) All goods equally
• C) Only exports
• D) Only services

Why: Excise duty is charged on specific goods such as alcohol and tobacco, while VAT applies broadly.

If the price before VAT is Rs 1,000, VAT at 13% is:

• A) Rs 130 ✔
• B) Rs 100
• C) Rs 113
• D) Rs 1,130

Why: VAT = 13% of Rs 1,000 = Rs 130.

If a bill including 13% VAT is Rs 2,260, the VAT amount is:

• A) Rs 260 ✔
• B) Rs 226
• C) Rs 293.80
• D) Rs 2,000

Why: Price before VAT = 2260 ÷ 1.13 = 2000; VAT = 260.

A business bought goods with VAT Rs 5,000 and sold goods with VAT Rs 8,000. VAT payable is:

• A) Rs 3,000 ✔
• B) Rs 13,000
• C) Rs 8,000
• D) Rs 5,000

Why: VAT payable = output Rs 8,000 − input Rs 5,000 = Rs 3,000.

If input tax is more than output tax, the extra amount is:

• A) Carried forward or refunded as per rules ✔
• B) Lost forever
• C) Paid as fine
• D) Added to income tax

Why: If input tax is more than output tax, the extra is carried forward or refunded under the rules.

The online system for filing tax returns in Nepal is run by the:

• A) Inland Revenue Department ✔
• B) Nepal Police
• C) Election Commission
• D) Department of Passports

Why: The Inland Revenue Department runs the online tax return system.

VAT is called a consumption tax because it is based on:

• A) Spending on goods and services ✔
• B) Income earned
• C) Land owned
• D) Number of family members

Why: VAT is a consumption tax because it is based on spending on goods and services.

The VAT registration certificate must be:

• A) Displayed at the place of business ✔
• B) Kept hidden
• C) Sent abroad
• D) Destroyed after a year

Why: The VAT registration certificate must be displayed at the place of business.

A business that is not registered for VAT:

• A) Cannot charge VAT ✔
• B) Must charge 26% VAT
• C) Can charge any VAT
• D) Gets free refunds

Why: Only registered businesses may charge VAT. An unregistered business cannot.

The main advantage of VAT over older sales tax is that it avoids:

• A) Tax on tax (cascading effect) ✔
• B) All taxes
• C) Customs duty
• D) Income tax

Why: VAT taxes only the value added at each stage, which avoids the tax-on-tax (cascading) effect of old sales tax.