VAT Bill In Nepal – Complete Guide To Format – Rules – How To Issue

If your business is VAT-registered in Nepal, every single sale you make requires a VAT bill. Some mistakes – wrong format, missing fields, wrong number of copies or not issuing one at all. Then, the Inland Revenue Department (IRD) can fine you NRs. 10,000 per missing invoice.

Also Useful : PAN Bill In Nepal – Format – Limit – Rules

This guide covers everything you actually need to know about the VAT bill in Nepal – what it is, exactly what must be on it, how to write one by hand or through software, how many copies you must keep, VAT rates, non-VAT items, the mismatch problem, fake bills and the questions business owners ask most often.

What Is A VAT Bill In Nepal?

A VAT bill – formally called a tax invoice, which is a legal document issued by a VAT-registered business every time it sells goods or provides services. It records the transaction and shows the 13% Value Added Tax that the buyer pays on top of the sale price.

Under Nepal’s Value Added Tax Act 2052 (and its amendments), every VAT-registered taxpayer must issue a VAT bill for every taxable transaction. The bill serves 3 purposes at once.

It is legal proof of the sale for the seller.
It is the buyer’s record for claiming VAT credit (if they are also VAT-registered).
It is the document the IRD uses to verify your monthly VAT return.

Key Point: A VAT bill is NOT optional. Selling without issuing one is a punishable offence under Nepali tax law, regardless of how small the transaction is.

Who Must Issue A VAT Bill In Nepal?

Any individual or business that is registered under VAT with the Inland Revenue Department must issue a VAT bill for every sale. VAT registration becomes compulsory when.

Business Type	Annual Turnover Threshold	Action Required
Goods / Trading	Above NRs. 50 lakh	Must register for VAT and issue VAT bills
Services	Above NRs. 30 lakh	Must register for VAT and issue VAT bills
Mixed (Goods + Services)	Taxable goods portion crosses threshold	Assessed separately – consult IRD

Once you are registered, you must issue a VAT bill for every transaction – there is no minimum transaction amount below which you can skip issuing a bill.

Mandatory VAT Bill Format – Required Fields

Nepal’s IRD does not prescribe a single fixed visual template, but every VAT bill must contain these mandatory fields. A bill missing even one of these fields is invalid and cannot be used for VAT credit claims or audits.

Field	What To Write / Example
Seller’s Business Name	Your registered trade or company name (e.g. Sharma Electronics)
Seller’s PAN / VAT Number	Your 9-digit PAN number issued by IRD
Seller’s Address	Registered business address
Bill Number (Bijak Number)	Sequential invoice number – must not repeat (e.g. 001, 002, 003…)
Bill Date	Date of transaction in BS (Bikram Sambat) format (e.g. 2081/12/15)
Buyer’s Name	Name of the customer or business purchasing
Buyer’s PAN Number	Required if the buyer is a registered firm – not required for individual buyers under NRs. 1 lakh
Buyer’s Address	Customer’s address
Description of Goods / Services	Clear name of each item sold (e.g. Sunflower Oil 500ml, 10 cartons)
Quantity and Unit	Number of units and unit type (pcs, kg, carton, litre, etc.)
Rate per Unit	Sale price per unit including your 3% margin if applicable
Taxable Amount (Kar Laagne Mulya)	Total before VAT – sum of all line items
13% VAT Amount	13% of the taxable amount
Total Amount (Kul Jamma)	Taxable amount + VAT amount
Seller’s Signature	Authorized signature of the seller or representative

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Important: VAT bills must be serially numbered without gaps. Skipping, repeating or cancelling numbers without proper documentation is a compliance violation.

How To Issue A VAT Bill Step By Step

You can issue a VAT bill in 2 ways in Nepal – byhand using a Printed Bill Pad (Bill Pad Method) or through Accounting Software such as Busy, Tally or the IRD’s online e-billing system. Both are legally valid.

Method A – Handwritten Bill Pad

Place two carbon papers behind the first page of your bill pad so all 3 copies are written at once.
Write today’s date in BS format at the top (e.g. 2082/02/07).
Enter the buyer’s name. If the buyer is a registered firm, write the firm name and their PAN number in the ‘Kretako Kardaata Darta Number’ field. If the buyer is an individual purchasing less than Nrs. 1 lakh worth of goods, you may write just their name and leave the PAN field blank.
List each item sold – item name, quantity, rate per unit and line total.
Add all line totals to get the taxable amount (Kar Laagne Mulya).
Calculate 13% VAT – multiply the taxable amount by 0.13.
Add the taxable amount and VAT amount to get the grand total (Kul Jamma).
Sign the bill in the ‘Bikretagko Hastakshar’ field.
Tear off the original (red copy) and hand it to the customer. Keep the two carbon copies.

Method B – Software (Busy / Tally / e-Bill)

Go to Transactions – Sales in your software.
Press Enter twice to open a new sales entry.
Select the date (auto-filled or enter manually).
Search and select the buyer’s name. Use F3 to create a new party if needed – save them under Sundry Debtors.
Enter item names one by one (search with the first few letters), quantities and confirm rates. The software calculates totals automatically.
Press F4 to finalize and save. The bill number is assigned automatically in sequence.
Print and hand the original to the customer. The software retains digital copies.

Pricing Tip: If you want to sell at a 3% markup above your purchase price, Calculate: Purchase Price × 1.03 = Selling Rate. This 3% covers your margin before the 13% VAT is added on top.

How Many Copies Of A VAT Bill Must You Keep?

A minimum of 3 copies of every VAT bill must exist. There is no maximum – you can make as many copies as your business needs. Here is what each copy is used for:

Copy	Name	Purpose
1st (Original)	Original / Red Copy	Given to the customer at the time of sale
2nd (Carbon Copy)	Office Copy / OC	Kept by the seller as business transaction proof and for audit purposes
3rd (Carbon Copy)	Auditor Copy	Provided to the auditor during statutory or tax audits

The two carbon copies (copies 2 and 3) are sometimes referred to together as ‘Original Copy’ or ‘OC’. Your office copy is also your primary proof of business transactions and must be kept organized by date and bill number.

VAT Rate In Nepal – 13% And Non-VAT Items

Nepal’s standard VAT rate is 13%, applied on the taxable value of goods and services. However, certain essential goods are VAT-exempt (non-VAT items), meaning 13% is not added when you sell them. If you sell non-VAT items, the VAT line on the bill is crossed out or left blank and the total equals the taxable amount only.

Common Non-VAT (VAT-Exempt) Items In Nepal

These items do not attract 13% VAT. When selling them on a VAT bill, enter the amount under the ‘Sthaniya Kar Chutko Bikri’ (locally tax-exempt sales) line.

Rice (Chamal) and rice bran (Kanika).
Lentils and pulses – Masur daal, Maas daal, Chana, Kerau, Bodi.
Flattened rice (Chiura) and puffed rice (Bhuja).
Salt (Nun).
Potatoes (Aalu) – added to the non-VAT list recently.
Flour and whole wheat.
Fresh vegetables and unprocessed agricultural produce.

All other goods – oils, biscuits, noodles, beverages, electronics, clothing and processed foods – are taxable at 13% VAT. When a single bill includes both VAT and non-VAT items, the bill shows two separate totals: the exempt amount on one line and the taxable amount with 13% VAT on another.

Rule To Remember: Do NOT write 13% on non-VAT items. Cross out or draw a line through the VAT section and write the total directly in Kul Jamma.

What To Enter In The VAT Register For Each Bill

Column	What To Enter
Miti (Date)	Date of the VAT bill in BS format
Bijak Number	Bill number (sequential)
Kretako Naam (Buyer Name)	Customer or firm name
Kretako PAN Number	Buyer’s PAN/VAT number (if a firm; leave blank for individuals)
Kar Laagne Mulya (Taxable Amount)	Total before VAT (for VAT items)
13% Bhyaat (VAT Amount)	13% of the taxable amount
Sthaniya Kar Chutko Bikri	Total of non-VAT / exempt items (if any)

For Bills With Only VAT Items: fill in the taxable amount and VAT columns.
For Bills With Only Non-VAT Items: fill in only the Sthaniya Kar Chutko Bikri column.
For Mixed Bills: fill in both columns.

At the end of each month, total all columns. These totals feed directly into your D3 VAT return, which must be filed with the IRD every month.

VAT Mismatch – What It Is And How To Avoid It

A VAT mismatch (mismatch problem) happens when two businesses involved in the same transaction report different amounts to the IRD. Here is how.

Business A buys goods worth NRs. 1, 00,000 from Business B. In A’s VAT return, A reports a purchase of NRs. 1, 00,000. But B only reports a sale of NRs 50,000 in their return. The IRD’s system flags this discrepancy – a mismatch.
This matters because Nepal’s D3 VAT return (Schedule 13 / Anusuchi 13) requires businesses to list every transaction above NRs. 1 lakh by name and PAN number – for both buyers (debtor list) and sellers (creditor list). This cross-referencing means the IRD automatically detects when Party A’s purchase doesn’t match Party B’s sale.

Mismatch Scenario	Risk
You reported NRs. 1 lakh in purchases – your supplier reported only NRs. 50,000 in sales	IRD flags your purchase – you may be denied VAT credit
You reported NRs. 80,000 in sales – your customer reported NRs. 1 lakh in purchases from you	IRD notices you under-reported sales – penalty and audit risk
Supplier issued a VAT bill but did not file it in their return	Your VAT credit claim is at risk even though you have the bill

How To Avoid Mismatch

Always ask your supplier for a VAT bill and ensure they file it in their return.
Check that the amounts on your purchase bills match what your suppliers have declared.
File your monthly D3 return accurately and on time.
Keep all VAT bills organized by month and bill number.

Fake VAT Bills – Why They Are Illegal And How The IRD Tracks Them

A fake VAT bill (Nakkali Bhyaat Bill) is a bill issued for a transaction that did not actually happen. In Nepal, some businesses buy fake VAT bills to inflate their purchase figures and claim VAT credit they have not legitimately earned – reducing the tax they owe.

This is illegal and carries serious penalties. Under the VAT Act, issuing or using a fake VAT bill is a criminal offence. Every actual transaction must have a corresponding VAT bill – no more, no less. Fabricating purchases to reduce VAT payable is considered tax evasion.

The IRD detects fake bills through the mismatch system described above – if a supplier has no record of a sale but a buyer is claiming a purchase from them, the mismatch is automatically flagged. With Nepal moving toward faceless audits and electronic billing, the detection rate is increasing every year.

Penalties For Not Issuing A VAT Bill In Nepal

Failing to issue a VAT bill or issuing an incorrect one carries significant financial penalties under the VAT Act 2052.

Violation	Penalty
Not issuing a VAT bill when required	NRs. 10,000 per missing invoice
Issuing an invalid / incomplete VAT bill	NRS. 10,000 per invoice
Using or issuing a fake VAT bill	Criminal prosecution + fine + potential business closure
Mismatch in VAT return (where under-reporting proven)	Additional tax assessment + interest + penalty
Not filing VAT return on time	NRs. 1,000 per month delay + interest on unpaid tax

The IRD also has the authority to conduct a Full Audit (going back up to 4 years) if irregularities are detected. Keeping clean, accurate, and serially numbered VAT bills is your best protection.

What Is A VAT Bill In Nepal?

A VAT bill is a legal tax invoice issued by a VAT-registered business for every taxable sale. It includes the seller’s VAT number, buyer’s details, itemized goods or services, the taxable amount and 13% VAT. It is required under Nepal’s Value Added Tax Act 2052.

Who Has To Issue A VAT Bill In Nepal?

Any business or individual registered for VAT with the IRD must issue a VAT bill for every sale of taxable goods or services – regardless of the amount. VAT registration is mandatory once a business exceeds NRs. 50 lakh annual turnover in goods or NRs. 30 lakh in services.

What Is The VAT Rate On A VAT Bill In Nepal?

Nepal’s standard VAT rate is 13%, applied on the taxable amount of goods and services. Certain essential goods – rice, lentils, salt, chiura and some vegetables – are exempt from VAT (non-VAT items) and should not have 13% added

How Many Copies Of A VAT Bill Must I Keep?

A minimum of 3 copies must be produced from every VAT bill. The original is given to the customer. The first carbon copy (Office Copy / OC) is kept by the business as transaction proof. The second carbon copy is given to the auditor during audits. There is no maximum limit on copies.

What Is The Minimum Number Of VAT Bills I Must Issue?

There is no minimum or maximum number of VAT bills you must issue in a period. You must issue one for every single taxable transaction. A minimum of 3 copies per bill is required, but the number of bills depends entirely on your number of transactions.

Can I Issue A VAT Bill Without The Buyer’s PAN Number?

Yes, in certain cases. If the buyer is an individual (not a registered firm) and the transaction is below NRs. 1 lakh, you can issue the VAT bill in their personal name without entering a PAN number. However, for transactions above NRs. 1 lakh or when the buyer is a registered firm or business, their PAN number is required.

What Is A VAT Mismatch And How Does It Affect Me?

A VAT mismatch occurs when your reported figures do not match what the other party in the transaction has reported to the IRD. For example, if you claim a purchase of NRs. 1 lakh but your supplier reported only NRs. 50,000 in sales, the IRD flags a mismatch. This can result in your VAT credit being denied, an audit or additional tax assessment.

Are Fake VAT Bills Legal In Nepal?

No. Issuing or using a fake VAT bill – one that does not correspond to an actual transaction – is illegal under Nepal’s VAT Act. It is treated as tax evasion and can result in criminal prosecution, heavy fines, and business closure. The IRD’s mismatch tracking system increasingly detects fake bills.

What Are The Penalties For Not Issuing A VAT Bill In Nepal?

The penalty is NRs. 10,000 per missing or invalid invoice under the VAT Act 2052. Repeated violations, fake bills or proven tax evasion can result in prosecution and business closure. The IRD can also conduct a full audit going back up to 4 years.

What Is The Difference Between A Valid VAT Bill And An Invalid Bill?

A valid VAT bill must contain the seller’s name, address and PAN/VAT number, a sequential bill number, date, buyer details, itemized goods or services, taxable amount, 13% VAT, total amount and seller’s signature. A bill missing any of these – especially the seller’s PAN number – is not a valid VAT bill and cannot be used for VAT credit claims or entered in your accounts.

How Do I Record A VAT Bill In My Sales Register?

Enter the date, bill number, buyer’s name, buyer’s PAN (if a firm), taxable amount (Kar Laagne Mulya), 13% VAT amount, and – if applicable – the non-VAT exempt amount (Sthaniya Kar Chutko Bikri) in your VAT register on the same day as the bill. Monthly totals from this register are used to fill your D3 VAT return with the IRD.

What Happens During A Full Audit (Punn Audit)?

A full audit is conducted by the IRD under the Income Tax Act and can go back up to 4 years. The IRD examines all your business documents, VAT bills, purchase records and financial statements. If irregularities are found – unreported sales, mismatched figures or fake bills – additional tax, penalties and interest are assessed. This is why keeping clean, numbered VAT bills is critical.

What Is An E-Bill (Electronic VAT Bill) In Nepal?

An e-bill is a VAT bill issued through an IRD-approved online system. It is legally equivalent to a printed VAT bill. Supermarkets, department stores and large retailers commonly use e-billing systems. E-bills have the same mandatory fields as printed bills but are generated and approved through the online platform in real time.

Do Non-VAT Items Need To Be On A VAT Bill?

Yes. If your business sells both VAT and non-VAT items, all items appear on the same VAT bill. Non-VAT items (exempt goods like rice, lentils, salt, chiura) are listed and totaled separately under the ‘Sthaniya Kar Chutko Bikri’ (locally exempt sales) line. The 13% VAT section is crossed out or left blank for those items.

Note: For the most current IRD rules and any updates to the VAT thresholds, always verify at the official IRD Nepal.