- VAT
- 13%
- registrations: business, tax, e-commerce
- 3
- ledger per sales channel
- 1
The registrations
Business registration: a sole proprietorship, partnership or private company.
PAN, and VAT if turnover passes the threshold or you choose to register; see VAT registration.
E-commerce registration: the E-Commerce Act, 2081 requires online sellers to register. Listed sites must show business details, the PAN and customer contacts. Check the current portal and any deadlines.
Payment and delivery partners: bank accounts, gateway approvals and courier contracts.
Foreign-owned ventures need investment approvals before registration; see FDI support.
Tax points specific to online selling
VAT on sales at 13%, with an invoice for each order that meets the rules; connected billing software may be required; see e-billing and CBMS.
Marketplace fees and advertising paid to foreign platforms such as search and social media: TDS and reverse-charge VAT may apply; see TDS on foreign vendor payments.
Digital service tax is charged on certain foreign digital services supplied to Nepali consumers, at a reported 2%, in addition to VAT rules.
Foreign-currency receipts for exports need bank channels to qualify for concessions; see IT exporters.
Income tax on profit, with depreciation on equipment and software.
The accounting that makes or breaks it
| Issue | What to do |
|---|---|
| Cash on delivery | Reconcile courier remittances against orders, and book short remittances as receivables |
| Returns and refunds | Issue credit notes properly; record restocking and write-offs |
| Marketplace payouts | Match each payout to orders, fees and tax withheld |
| Gateway settlements | Reconcile daily; fees are an expense, not a netted amount |
| Inventory | Count regularly and reconcile with the platform's stock |
| Discounts and vouchers | Record at net or gross consistently, with VAT treated correctly |
Many sellers see "sales" in the dashboard and a different figure in the bank. The gap is returns, fees, delayed payouts and COD shortfalls. See profitable but short of cash.
What good looks like
A separate ledger per channel, a monthly reconciliation of orders to cash, inventory counts, a VAT return that ties to the billing system, and a monthly report showing margin by product and by channel. Our bookkeeping and data analytics teams build this. Rules and deadlines for online sellers are changing, so confirm the current requirements before you launch.
A worked example: one month of an online fashion shop
A shop sells clothes through its own website and a social media page, with cash on delivery in the Kathmandu valley and prepaid cards elsewhere. In a month it receives 600 orders with an average value of NPR 3,500 including VAT. Illustrative.
| Item | Amount (NPR) |
|---|---|
| Orders received (600 x 3,500) | 21,00,000 |
| Orders cancelled before dispatch (40) | (1,40,000) |
| Orders delivered (560) | 19,60,000 |
| Returns accepted (70) | (2,45,000) |
| Net sales including VAT | 17,15,000 |
| Net sales excluding VAT (divided by 1.13) | 15,17,699 |
| VAT on net sales | 1,97,301 |
| Courier collection fees and charges | (1,10,000) |
| Gateway and card fees | (28,000) |
| Advertising on foreign platforms | (1,60,000) |
The sales figure the owner sees on the dashboard is NPR 21 lakh. The real net sales after cancellations and returns are NPR 15.2 lakh before VAT, a difference of nearly 30%. A shop that budgets from the dashboard figure will find that cash is short every month.
Cash side. The couriers remit cash on delivery a week or two after the order, less their fees. Card payments settle in the bank after the gateway's delay and charges. Returns require refunds, which are paid out of the same bank account. The bank balance on any day is therefore a poor guide to profit, and the shop needs a weekly reconciliation.
Tax side. The shop accounts for VAT on net sales and claims input VAT on purchases of stock and services where it has valid invoices. The advertising paid to foreign platforms raises withholding and reverse-charge questions; see TDS on foreign vendor payments. Income tax follows profit after costs.
Building the reconciliation that matters
A weekly reconciliation for an online business has four parts.
Orders to deliveries: list the orders, mark delivered, cancelled, returned and pending, and agree the counts with the courier's report.
Deliveries to cash: match each delivered order to the courier remittance or gateway settlement. Unmatched items go on a list with an owner.
Cash to the bank: agree the bank statement to the settlements and the refunds.
Stock to orders: compare the stock movement from the system with the physical count of a sample of lines.
Differences are normal at first, but a good business finds the causes: missing remittances, wrong amounts, duplicate refunds, stock that was shipped but not recorded and orders recorded twice. Once these are fixed in the process, the weekly job takes an hour.
Pricing, margins and promotions
Many online sellers discover they lose money on some sales. To see this, calculate the contribution per order after all variable costs.
Product cost, with import duty and freight if imported.
Packaging and printed materials.
Courier cost, including failed deliveries and returns.
Gateway and payment charges.
Advertising cost per order, which can be high on some channels.
Discounts and vouchers.
Return rate multiplied by the cost of reverse logistics and the loss on damaged items.
Compare the result with the selling price without VAT. A product that looks profitable at a 40% gross margin may be loss-making after courier, returns and advertising. Our break-even calculator helps you see the volume you need. Review the margin by product, by channel and by customer type, and drop or reprice what does not work; see which products and customers make money.
Legal and compliance points specific to online selling
Display of business information on the site or page: the registered name, PAN, address and contacts.
Consumer protection: clear pricing, return and refund policies and handling of complaints.
Product rules: some goods need licences or standards approvals, and some are restricted online.
Data protection: customer data should be kept safe and used only for the purposes stated.
Intellectual property: use only images, brands and content you have the right to use.
Marketplace rules: each platform has its own terms, fees and penalties, and account suspension is a business risk.
Foreign suppliers and dropshipping: import duties, VAT and customs clearance apply to goods brought in for sale; check the rules for the route you use.
Mistakes online sellers make
Selling through social media without registering, then discovering that platforms and banks require registration.
Treating personal and business bank accounts as one.
Not issuing invoices for each sale, so that VAT and income cannot be reconciled.
Ignoring returns in the accounts until year end.
Paying foreign advertising without checking withholding and VAT; see TDS on foreign vendor payments.
Holding too much stock because of optimistic forecasts, which ties up cash; see profitable but short of cash.
No monthly report that shows margin by product.
Questions people ask
Can I sell from my home? A home address can be used in some cases, but the registration, the lease and local rules need to be checked.
Do I charge VAT? If your turnover or choice puts you in the VAT net, you charge 13% on taxable sales and issue VAT invoices. Otherwise you do not, but you also cannot claim input credit; see VAT registration in Nepal.
What about selling to customers abroad? Exports of goods and services have their own VAT and customs treatment, and foreign currency receipts may qualify for concessions if they come through a bank.
Do I need e-billing software? Possibly, depending on your turnover and the IRD's rules; see e-billing and CBMS.
How should I record cash on delivery? Record the sale on delivery and a receivable from the courier until they remit, then match the remittance and record the courier's fee as a cost.
We set up the books, reconciliations and reporting for online businesses and help with registration and tax. See bookkeeping, data analytics and reporting and startup consulting. Rules for online sellers are still developing, so confirm the current requirements with the registering authorities.
A 90-day plan for a new online business
Days 1-30: Foundation. Choose the legal form and register the business. Obtain a PAN and decide on VAT. Register on the e-commerce portal as required. Open a business bank account and set up a payment gateway. Write your return, refund and delivery policies. Choose accounting software and set up a chart of accounts with separate income lines for each channel.
Days 31-60: Operations. Agree terms with couriers, including cash on delivery remittance days and fees. Set up stock control with a unique code for each item. Start issuing invoices for every sale. Begin the weekly reconciliation. Track advertising cost per order for each campaign.
Days 61-90: Control. Prepare the first full monthly accounts and VAT return. Review the margin by product and by channel. Decide which products and campaigns to continue, change or stop. Check stock against the system and investigate differences. Prepare a cash forecast for the next quarter, including seasonal peaks such as festivals.
After 90 days, you should know your real margin, your cash cycle and your tax position, which is far more than most online sellers know after a year.
Scaling: when to add staff, a warehouse or a company
Growth changes the finance needs. Early on, the owner can do most of the work. As orders grow, add a part-time accountant, a packing and dispatch person and a customer service person. When the volume justifies it, a small warehouse gives better stock control than a spare room. If turnover rises above the thresholds for VAT or e-billing, or if you take on investors or bank loans, a private limited company is the better vehicle; see company registration in Nepal and before bringing in an investor. Raise the question of structure before it becomes urgent, since changing later costs more.
