Nepal's ride-sharing platforms must collect 5% VAT on the driver's fare, and charge 13% on their own commission

What changed in detail

Nepal’s Inland Revenue Department issued a public notice implementing a new sub-section (1-Kha) of Section 7 of the VAT Act 2052, added by the Finance Act 2083. Under it, a ride-sharing or delivery platform operator (the notice names Pathao, inDrive and Yango as examples) must:

• collect VAT at 5% of the fare — the fee the driver charges the passenger for the transport or delivery service — on the driver’s behalf, at the time of the transaction;
• issue the prescribed tax invoice for that fare on the driver’s behalf, though the invoiced income is not the platform’s own;
• remit the VAT it has collected on drivers’ behalf to the tax office by the 25th of the following month; and
• separately charge the standard 13% VAT on its own commission and other service-fee income from drivers, under its normal VAT registration.

The platform cannot claim input tax credit on the 5% it collects and remits on a driver’s behalf. A rider must hold a PAN but is not required to register for VAT personally — the platform carries that obligation.

What it means

The two rates apply to two different flows of money, and mixing them up is the easiest mistake to make: 5% is on what the passenger pays the driver (the fare), collected and remitted by the platform as an agent; 13% is on what the driver pays the platform (commission and other service fees), which is the platform’s own ordinary VAT liability. This is a familiar collection design — the platform, not the individual driver, is the point at which VAT is captured, because a population of drivers is expensive to register and audit while a handful of platforms already hold every transaction record. Platforms should build the 25th-of-next-month remittance deadline into their compliance calendar as a distinct, recurring obligation from their own periodic VAT return.