Imagine bustling markets like Kathmandu’s Indrachowk, centuries ago. Coins facilitated trade. Fast forward to today, traditional stores are still booming along side establishment of stores with digital accounting paints a vastly different picture. Nepal’s retail landscape boasts a rich history being part of the silk route intricately woven with evolving regulations, and technology. Let’s explore this fascinating journey!
Early Days: Barter to Coins and Kings’ Taxing
Before standardized currency, barter ruled. People exchanged goods and services using metal bits. Later, coins like Paisay, Mohar streamlined trade. Kings levied taxes for various purposes, laying the foundation for the Inland Revenue Department (IRD) established in 1976.
General Trade:
Shops were to be registered in order to perform transactions. Manual record system were promoted where as market was operating paperless unless being credit. At the end of the financial year falsified data were submitted to government. Big traders with accounting literacy enjoyed the ethical gaps propelling similar practices downstream till end user. Open border unrecorded cash flow smashed proper records of data affecting the perception of the government bodies. As they were taking consideration of entirely different figures far from reality. Multi decades of malpractice in accounts has established habitual practice of accounting ignorance contributing towards ambiguous economy.
Modern Retail:
Today, products fall under VAT-able (subject to Value Added Tax) or non-VAT-able categories. While essentials and semi-essentials exist, yearly budget reforms often bring changes. Registration is mandatory , with PAN numbers for small businesses and VAT numbers for specific products like alcohol, cigarettes and imported goods. Additionally, exceeding 50 lakh annual turnover in VAT-able products upgrades a shop to the VAT category. And those with annual transactions exceeding 5cr must use IRD Verified billing softwares to generate sales invoices. Every goods being transported is to be supported by sales invoice and respective VCTS otherwise it is a punishable offence.
VAT-registered stores submit monthly purchase and sales details to the IRD, crucial for yearly audits. Documentation is key, with supporting documents for transactions exceeding Rs. 100,000. Taxes are calculated and paid based on these verified details. The cycle resets annually, from Shrawan 1st to Ashad 31st of the following year.
Every transaction requires a proper invoice with store and buyer details. Shops must maintain meticulous records and submit them to the IRD annually.
Transition
Imagine a human with knowledge of basic mathematics. The person visits supplier, purchases goods for x amount of money, transports it to their shop and sales it with some margins. The cycle repeats as transaction takes place. The human can support their family and live a basic livelihood. Suppliers have running vehicles that supplies goods to retailer’s door step and collects money from the store – a complete home delivery service. For the store to operate accurately, a manual record keeping system is required to be updated daily on a Day Book and ledgers [ Suppliers, Customers, Inventory ]. This is a very flexible system that can be replicated easily. Having advantage of flexibility general trade requires the owner to be present in the store all the time as the store operates in their supervision . And the stores sales reach threshold.
Traditional vs. Modern Trade: A Coexistence with Challenges
Nepal’s retail scene presents a unique duality. In traditional stores like those in Indrachowk, transactions often occur without receipts or records, hindering informed government decisions as they have humongous volume of transaction each day. While registered, they are continuing what they have learned along the way – submitting inaccurate data that doesnot raises any flags to keep things simple and running.
Modern trade using IRD verified Software embraces technology. Software tracks purchases, inventory, sales, and transactions, all locked by the government for transparency. These stores face challenges competing with traditional ones who operate with agility and manipulated data. Their selling prices are defined by their operational principles and they cannot hide anything.
Online payments are growing, but sales data often remains unlogged. Modern trade with dynamic qr connects the two – transactions and invoices. However, law abiding citizens are bound by regulations, and struggles to compete with those operating outside the system, creating an uneven playing field. Where the neighbouring pasal exploits the law driving completely on the wrong way in national economic highway pushing those driving on the right side of the lane off the cliff.
Nepal is at a transitional phase. The government’s initiative to mandate IRD-verified software for certain businesses is a step towards bridging the gap. However, traditional traders often avoid purchase bills to stay below the threshold mark for not be recognized by IRD, perpetuating the issue towards economic catastrophe.
Conclusion: Balancing Tradition and Transparency
Nepal’s retail story is one of constant evolution. Balancing tradition with technological advancements and ensuring fair competition will be crucial. As consumers, understanding the importance of data via proper accounting and record keeping. The awareness contributes to a more transparent and informed economy. Local government bodies although being aware of these malpractices turn their heads towards the other side due to the strong influence of Udhyog Banijya Sangh. Every one from the sangh is aware of this and accepts it as – JamiJamaiye BebesTha.
What I want through these words is acknowledge the goosebump of “ThaHa” that we get in times. To acknowledge the foundational truth of our ground reality. For us to improve towards excellence, we must know where we stand. We must accept it. When we put on the hard work performing litmus of clarity, empathy, understanding and peace we know we are in the right direction.