Income tax exemption raised Disposable amount up by Rs 5,000 per couple
MILAN MANI SHARMA
KATHMANDU, July 14: Salaried and fixed middle income groups have three good reasons to cheer up in fiscal year 2009/10, starting July 16 2009.
First, the budget - planning to spend Rs 285.93 billion in the next fiscal year - has raised the tax exemption limit for individuals to Rs 160,000 and to Rs 200,000 for couples. This has directly raised their net disposable income by Rs 3,750 and Rs 5,000 a month respectively.
Secondly, the government has lowered the capital gains tax (CGT) to 10 percent from 15 percent, ensuring people a better return on share transactions in the new fiscal year. This will encourage all share investors and spur secondary market transactions as well.
Thirdly, the government has annulled the local development tax (LDT) from Monday. This will instantly reduce the cost of imports by at least 1.5 percent, meaning the prices of imported goods will be slightly cheaper.
Revocation of LDT and dropping of CGT will also encourage business, industry and other investors as well.
Ups and Downs
The budget that Finance Minister Surendra Pandey presented at parliament Monday slashed customs duty for essential goods, making sugar and other consumable items cheaper. However, upper-middle income groups aspiring to climb the economic ladder have been asked to pay more.
Hiking excise duty, the budget has caused the price of four wheelers to go up by around 5 percent while motorcycles will become more expensive by 6 percent.
Rise in excise and customs duty has made liquor, beer, cigarettes and cement clinker more expensive. Interestingly, however, the budget has slashed customs duty on white cement by 10 percent.
Moreover, the government has imposed value added tax (VAT) on the construction of buildings, apartments and shopping complexes worth over Rs 5 million. Ten percent CGT has also been imposed on transactions of land and houses exceeding Rs 5 million. The government is bringing commodity futures market transactions into the tax net as well.
Industry and Trade
Aiming to support industry and spur trade, the budget has reduced the prevailing 40 percent customs duty to 30 percent and slashed the agriculture reform fee.
It has offered an income tax discount of 10 percent for special and information technology industries employing 300 or more Nepalis around the year. Similar 20 percent tax discount has been offered to industries employing 1,200 or more Nepalis around the year or providing direct employment to more than 100 Nepalis including 33 percent women, dalits and the handicapped.
Industries using more than 90 percent domestic scrap have been offered excise duty exemption. VAT and customs duty exemption have been offered on the construction materials, machinery, equipment, tools and spare parts for hydropower projects.
The new budget, surprisingly, has made registration for VAT mandatory for person importing taxable items exceeding Rs 10,000.
It has also offered various concessions and procedural simplifications for export industries.
For instance, lump sum VAT refund within 30 days has been promised to an individual or firm exporting more than 40 percent of monthly sale. Concession has also been offered to industries importing raw materials through bank guarantees or the pass book record facility.
Firms producing, importing and selling excisable items need no longer get an excise license except in the case of the brick industry, stone crushers and tobacco products.
Tax Compliance Year
The government has pushed fiscal year 2009/10 as Tax Compliance Year for fostering the tax-paying habit. Under the program, the government has made it compulsory for all income earners and advance tax payers (under TDS or tax deduction at source) to get a permanent account number (PAN).
To encourage compliance, the government has offered a scheme whereby income earners not registered with PAN so far can enjoy a tax and fine exemption for the previous year if they get their PAN and submit the tax returns of 2007/08 and 2008/09.
“Those who don´t file tax returns and pay tax within this exemption period, however, will be subjected to the payment of all taxes, charges, interest and penalty right from the time they got involved in income generation,” said Minister Pandey.
New Service Centers and IRO
In a bid to enable taxpayers to clear their dues at the local level, the government announced establishing of taxpayer service centers in Kathmandu Valley, Dhankuta, Surkhet, Baglung and Jumla. “An Inland Revenue Office (IRO) also will be established in Butwal.”
In districts where the IRO is absent, the government is setting up a taxpayer service unit at the District Treasury Office for registration, distribution of PAN, tax collection and providing of other taxpayer services.
Pandey also proposed setting up a high-level permanent Central Revenue Board within the next fiscal year. He has mooted changes in the structure of the Department of Revenue Investigation and announced immediate establishment of additional unit offices in Thankot, Bardibas and Attariya.
He further announced formation of a separate revenue police as an emergency flying squad for controlling revenue leakages.