IRD investigates suspected misuse of VAT refund facility

- ASHOK THAPA, Kathmandu

Jun 17, 2013-

The Inland Revenue Department (IRD) has launched a probe into suspected misuse of the value added tax (VAT) refund facility by oil and ghee factories. Producers of oil and ghee get a 50 percent refund of the VAT they pay on the import of raw materials.

The investigation was prompted by media reports that suggested misuse of the VAT refund facility by vegetable ghee factories. The IRD said it had been scrutinizing the documents of all the oil and ghee factories registered at the Large Taxpayers Office (LTO).

IRD director general Tanka Mani Sharma said his department would conclude the probe within a week. “We want to make sure whether oil and ghee factories have been misusing the government facility as reported in the media and the complaints we have received,” Sharma added.

He said the department would first check the documents of the companies received from the LTO, and officials would also visit the production units to see the real situation if necessary.

A few days ago, the IRD had asked the LTO to provide the documents and files related to 16 oil and ghee producing companies. A high-level LTO official said they had sent all the documents to its head office. As per the complaints registered at the IRD, oil and ghee factories were obtaining VAT refunds on imports that never happened by submitting fake documents. The IRD has formed a probe committee under the coordination of director general Sharma. He said that if fraud was proved, the refund facility could be scrapped.

The government had introduced the VAT refund facility three years ago, when Surendra Pandey was finance minister, in a bid to enhance the competitiveness of local ghee and oil producers. Indian producers pay 4 percent VAT, while local factories have to pay 2.5 percent excise duty and 6.5 percent VAT, a 50 percent discount on the customary 13 percent VAT.

According to the Nepal Vegetable Ghee and Oil Manufacturers’ Association (NVGOMA), only 16 of the 21 factories registered are currently in operation. It said these companies have a combined investment of Rs 20 billion and employ more than 8,000 persons.

NVGOMA president Bikash Dugar said that he didn’t believe any misuse of the VAT refund facility had taken place. “As the VAT return facility involves a complex procedure and requires stringent processing, I think there is little possibility of any of the companies misusing it,” he said. He added that the VAT refund facility was very important for the producers as they would not survive if the incentive were to be scrapped.

Meanwhile, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) expressed concern over the allegations of misuse and demanded that the truth be brought out.

Published: 18-06-2013 09:16

User's Feedback

Click here for your comments

Comment via Facebook

Don't have facebook account? Use this form to comment