Nepal, Nov. 20 -- Nepal introduced value added tax (VAT) on November 16, 1997 to make the commodity tax system simpler and more transparent, and develop a sustainable source of domestic revenue. VAT was launched not as an additional tax but as a replacement for the then sales, hotel, contract and entertainment taxes. VAT became a major source of revenue right from its first year, generating Rs7.12 billion in fiscal 1997-98. The government expects to collect Rs400 billion in VAT in the current fiscal year 2022-23.

This tax currently accounts for about one-third of the total tax revenue. The VAT revenue-to-GDP ratio increased from 2.5 percent in 1997-98 to 6.8 percent by 2021-22. This ratio is much higher than in other South Asian countrie...