THE government is preparing to close down brick kilns that have not been registered with the value added tax (VAT) office as per this fiscal year’s budget announcement. The Inland Revenue Department (IRD) intends to get tough against brick factories as many of them have been continuously disregarding orders to register themselves as VAT payers. The government’s annual financial plan for this fiscal year has introduced a provision requiring brick factories to come under the VAT net. The budget has also revoked the provision under which brick factories with annual transactions of less than Rs 2 million were exempt from VAT. “We have asked brick makers to register themselves with VAT by Oct 17,” said Tanka Mani Sharma, director general at the IRD. He added if the brick factories are found to be operating without being registered with VAT, they would be closed down by the government. However, the outstanding VAT of previous years will be written off. As per the VAT Act, the tax is imposed on businesses having transactions of more than Rs 2 million annually. Rajan Khanal, chief of the Revenue Management Division at the Finance Ministry said that the Rs 2 million ceiling had been removed under the assumption that there wouldn’t be any brick factory with annual transactions of less than that amount. He added other businesses like hardware shops, discotheques, dance bars and dry cleaners, among others, had been brought under the VAT net without any limit on the turnover. A recent IRD study found that brick kilns in the Kathmandu valley produce 5-20 million bricks each at a time. A factory produces bricks five-six times a year. A brick costs around Rs 10 apiece. The budget for the current fiscal year had adopted this provision after the government’s previous attempts to bring brick factories under the VAT net failed. The provision also comes against a backdrop of several failed attempts to bring brick makers under VAT due to political patronage. Last year, a committee formed by the Finance Ministry had also recommended that brick kilns be brought under the VAT regime. The 11-member committee consisting of officials from the ministry, brick manufacturers and a representative from the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) had recommended that brick makers be forgiven from paying past VAT. Meanwhile, IRD officials said that brick makers had begun registering themselves with the VAT office. As of the last fiscal year, around 250 brick factories had come under the VAT net. Mahendra Bahadur Chitrakar, president of the Bricks Producers Association, said that a number of brick makers were preparing to come under the VAT net. He added they would join the VAT regime on the condition that government take special care of their business to ensure security of their investment. “As the business is seasonal, the government should give us special treatment,” he said. “Otherwise, what is the point of paying VAT when we have business and the government doing nothing for us during the monsoon when our business is almost dead?” Chitrakar, who is also president of the Federation of Brick Industries, questioned how the government could impose VAT on a “seasonal business” like brick manufacturing. He said that brick factories were always at risk of losses as their products are easily damaged by rain or other extreme weather conditions. Brick producers also said that the government should come up with specific programmes and policies to organise the sector. A total of 21 associations are affiliated to the federation, while around 1,000 registered brick factories are in operation across the country. Last year, the IRD published a notice asking brick makers to register themselves with VAT. It also confiscated the books of accounts of two dozen brick kilns in the valley on the charge of not complying with VAT. Responding to the IRD move, the federation launched an agitation suspending brick sales in the Kathmandu valley. Following the row between the IRD and brick factories, a dialogue committee formed by the Ministry of Finance had recommended that brick kilns too be required to pay VAT.
No comments:
Post a Comment