Kathmandu. The government has also decided to include insurance agents in the VAT net. For the upcoming fiscal year 2083/84, Finance Minister Dr. Swarnim Wagle, in the budget statement, has proposed to make it mandatory for insurance agents to register under VAT compulsorily.
The budget statement reads, “Any person doing the business of an insurance agent in the financial year 2082. 83. If VAT has not been collected in accordance with the law, the interest, additional fees and fine levied on the tax levied shall be waived off and such a person will not be required to submit the tax return.
Until now, insurance agents were registered only in income tax. If the provisions of the bill proposed by the government are passed by the parliament, the agents will also be registered under VAT (VAT).
The government has been deducting 15 percent advance tax on the commission of insurance agents.
According to the new provision, agents have to be registered under VAT and they will also have to issue tax invoices. For example, if an agent earns Rs. 25,000 as commission, 15% tax will be deducted at source of Rs. After deducting Rs 3,750, the insurer deposits the remaining Rs 21,250 directly into the bank account of the insurer. Now, after the implementation of the provision of registration in VAT, Rs. 22,124 taxable income at Rs. 13% VAT. A total of Rs. 2,876 was added. The agent has to issue an invoice of Rs 25,000.
After receiving a bill of Rs. 25,000 including VAT, the insurer will be able to pay Rs. 1.5 per cent as tax deduction at source. After deducting Rs. 331.85, the agent will be entitled to the VAT and the remaining Rs. 24,668.15 will be paid. Out of this amount received, the agent will pay Rs. Rs 2,876 will have to be deposited in the government revenue fund. In this way, after deducting the amount of both tax deduction and VAT at source, the agent will earn Rs. 21,792.15 will be paid.
The implementation of the VAT and tax deduction at source as compared to the current provision of 15 percent advance tax deduction will have a positive impact on the commission income of the agents. They will receive a little more payment than what they have been receiving before. The insurance agent has to submit an income statement every year.
