Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: The Supreme Court has ruled that the Educational Consultancy Association of Nepal (ECAN) must pay value-added tax (VAT), additional fees, and penalties on transactions conducted before it was VAT-registered, after determining that its turnover had exceeded the legal threshold.
The verdict covers ECAN’s financial transactions from fiscal year 2073/74 to 2078/79 (BS), during which the Court found that its business volume surpassed the VAT registration limit. As a result, ECAN is now required to pay Rs 7.5 million in tax along with penalties and additional charges, bringing the total liability to Rs 22.5 million.
VAT Threshold Breach
Under Nepal’s VAT Act, organizations engaged in service and consultancy activities must register for VAT if their annual turnover exceeds Rs 2 million (20 lakh). Based on this provision, the Inland Revenue Office, Battisputali, and the Inland Revenue Department had earlier assessed tax against ECAN.
Challenging the assessment, ECAN filed a writ petition at the Supreme Court in Falgun 2080 (BS). The association argued that it is a non-profit entity, collects fees from members solely to operate the organization, and does not engage in direct commercial trading.
ECAN further claimed that it only collects service charges related to IELTS processing, while the remaining amounts are forwarded to the British Council or IDP, and therefore should not be subject to VAT.
Court Rejects Non-Profit Argument
The Supreme Court rejected ECAN’s argument, effectively ruling that the nature and volume of transactions fell within taxable service activity under VAT law, regardless of the association’s non-profit status.
Although ECAN registered for VAT in 2080 BS following tax scrutiny, the ruling requires it to settle VAT-equivalent dues and penalties for the period prior to registration.
Revenue Enforcement Signal
The decision reinforces the tax authority’s position that exceeding statutory turnover thresholds triggers mandatory VAT obligations, even for associations or institutions claiming non-profit status, if their activities qualify as taxable services under the law.
Your email address will not be published. Required fields are marked *
Comment *
Name *
Email *
Website
Save my name, email, and website in this browser for the next time I comment.
