Provisions Relating to Invoices- Guide to Invoice & Abbreviated Tax Invoice

An invoice, also known as a bill, is a commercial document provided by a seller to a buyer about a sale transaction that indicates the items, quantities, and agreed-upon prices for products or services the seller has provided. In supplying goods or services, the registered person shall issue a tax invoice as per the VAT Act and Rules.

Tax Invoice

When supplying goods and services, the registered person needs to issue a tax invoice in the format outlined in Schedule 5 and 5A of the VAT Rules, 1997 (2053 BS). The invoice needs to disclose the goods’ type, size, model, and brand.

Three copies of such tax invoices are to be prepared – the original copy shall be given to the recipient, the second copy shall be separately recorded so that it can be produced as and when asked for by the authorities and the third copy shall be recorded by the registered person for the purpose of their transaction.

Invoice to Be Raised from Cash Machine or Electronic Medium

The Inland Revenue Department may require any taxpayer to use a cash machine, and such taxpayer shall use a cash machine to issue invoices for transactions. A taxpayer who has obtained approval for raising an invoice through electronic medium shall raise the invoice accordingly.

Abbreviated Tax Invoice

An abbreviated tax invoice is an invoice used by businesses that sell goods or services to large numbers of customers in small amounts.

The registered person shall file an application to the tax officer to obtain approval for issuing the abbreviated tax invoice. As per Rule 18 of the VAT Rules, the tax officer may grant permission to issue abbreviated tax invoices for the retail sale of goods or services. The format of the abbreviated Tax Invoice is given in Schedule 6 of the VAT Rules.

When several goods of small value have been sold, an abbreviated tax invoice should mention the name of each item separately. A recipient who receives an abbreviated tax invoice upon the purchase of goods is not allowed to deduct tax. To get the tax deduction, a tax invoice is a must.

A registered person who issues an abbreviated tax invoice to the recipient shall maintain the following types of records:

a. Prepare and maintain a duplicate copy of the original invoice

b. Where a transaction has been carried out by maintaining a duplicate of the till roll, the total must be calculated and maintained daily

c. To maintain records of the value inclusive of tax for each transaction

If a registered person is found not to have maintained the records mentioned above, the Tax officer may cancel the permission granted to issue an abbreviated Tax Invoice.

The monetary limit for issuing abbreviated tax invoice is Ten thousand rupees. Therefore, an abbreviated tax invoice cannot be issued where a transaction value exceeds Ten Thousand rupees. If the recipient (Customer) asks for the tax invoice, it shall be the duty of the registered person (Seller) to provide the tax invoice, and he shall have no right to deny the customer for providing the tax invoice.

The total tax figure from an abbreviated invoice shall be calculated by multiplying the invoice price by the tax fraction. The term tax fraction means the Total Tax Rate/(Tax Rate + 100).

Credit Note or Debit Note

Credit note/Debit note need to be issued when adjustment is required in the business dealings related to sales/purchases.

A registered person issues a credit or debit note owing to a change in the value of the goods or services they supplied; they must clearly write a credit or debit note in such note and disclose the following details.

(a) Serial number

(b) Date of issue

(d) Recipient’s name, address, and registration number if the recipient is a registered person

(e) Number and date of the tax invoice connected with the transaction

(f) Particulars of the goods or services and reason for credit or debit

(g) Amount credited or debited

(h) Tax amount credited or debited

A registered taxpayer shall maintain a monthly record of credit or debit notes.

In the Event of Payment in a Foreign Currency

The supplier shall issue a tax invoice upon receiving the payment in convertible foreign currency for the supply if any goods or services. The tax invoice shall be mentioned in Nepalese rupees. The equivalent Nepalese rupees should be considered after converting the foreign currency using the exchange rate prescribed by the Nepal Rastra Bank (NRB) on the day of the transaction.

Conclusion

The provisions related to the invoices are mentioned in Chapter 4 of the VAT Rules, 2053. Invoices are contracts between a business and its customers because they show what services were done and how much money is owed. Invoices also help businesses keep track of their sales and budgets.