Comparison
Registering for VAT, or staying under the threshold
VAT registration is compulsory above the turnover threshold. Below it, registering is a choice, and the right answer depends almost entirely on who your customers are.
Businesses under the threshold usually avoid registering because of the monthly filing. That is a real cost, and it is often smaller than the input credit being given up.
Registration is compulsory once annual turnover crosses NPR 50 lakh for goods or NPR 30 lakh for services, and immediately for certain activities regardless of turnover. What follows is about the consequences either side of that line.
Reviewed September 2026
| VAT registered | Not registered | |
|---|---|---|
| Input credit on purchases | Recoverable, so VAT on stock, equipment and services stops being a cost. | Not recoverable. VAT paid to suppliers is absorbed into your cost. |
| Price to a VAT-registered customer | Effectively cheaper, because they reclaim the VAT you charge. | Effectively dearer, because your embedded VAT is buried in the price and cannot be reclaimed. |
| Price to a consumer | You add VAT, so your price is higher or your margin is thinner. | No VAT to add, which is a genuine advantage on consumer pricing. |
| Filing | Monthly return, whether or not there were sales, with penalties for late filing. | No VAT return. Income tax and TDS obligations continue. |
| Records required | Purchase and sales books, VAT invoices, reconciliations that hold up to inspection. | Lighter, though good records are still needed for income tax. |
| Selling to corporates and government | Usually expected, and often a condition of being on a vendor list at all. | A frequent reason for losing business without being told why. |
| Crossing the threshold mid-year | Already handled. | Registration becomes compulsory, and late registration attracts penalty and back-tax exposure. |
How to decide
If most of your customers are VAT-registered businesses, register voluntarily. They are indifferent to the VAT you charge because they reclaim it, while you begin recovering VAT on everything you buy. The filing cost is usually outweighed within months.
If you sell to consumers and buy little that carries VAT, staying out is defensible. Your prices are genuinely lower and you keep the monthly compliance off your plate.
Watch the threshold if you are growing. Registration is compulsory once turnover crosses it, and businesses that notice late face penalties and tax on sales already made at prices that did not include VAT.
Capital spending changes the maths. A business about to buy equipment or fit out premises may want to be registered before the invoices land, not after.
Questions people ask
- What is the VAT threshold in Nepal?
- NPR 50 lakh of annual turnover for goods, and NPR 30 lakh for services. Some activities require registration from the first rupee regardless of turnover, including businesses in specified areas and certain professional and hospitality services, so check your activity rather than only your turnover.
- Can I register for VAT voluntarily below the threshold?
- Yes. Voluntary registration is available and is common among businesses selling to corporate customers, precisely because those customers can reclaim the VAT charged.
- Do I have to file if I had no sales in a month?
- Yes. A nil return is still a return, and the penalty for not filing applies whether or not there was activity.
- Can I deregister if turnover falls?
- Deregistration is possible subject to conditions and to the IRD being satisfied. It is not automatic, and any input credit claimed on assets still held may need adjusting.