Billing is where a lot of Nepali restaurants get nervous, and understandably so. Between VAT, service charge, and what the Inland Revenue Department (IRD) expects to see on a bill, it is easy to either overcomplicate things or quietly cut corners that come back to bite you at audit time. This is a plain-language walkthrough of how VAT and compliant billing generally work for cafes and restaurants in Nepal.

A note before we start: tax rules and thresholds change, and your exact obligations depend on your registration, turnover, and location. Treat everything here as a working overview, not legal advice. Confirm the current rules and your specific position with a qualified accountant or directly with the IRD.

VAT and PAN: which one are you?

Every business needs a PAN (Permanent Account Number). Whether you also need to register for VAT depends mainly on your turnover and the nature of your business.

PAN-only (small taxpayer): many small cafes operate under PAN without charging VAT, often paying tax under a turnover-based or presumptive scheme.
VAT-registered: once you cross the registration threshold — or if you choose to register — you charge 13% VAT on taxable sales, file VAT returns, and can claim VAT paid on your purchases.

The threshold and the exact schemes are the kind of thing that gets revised, so this is precisely the point to confirm with your accountant. Registering for VAT when you do not need to, or failing to register when you should have, both cause avoidable headaches.

When 13% VAT applies

If you are VAT-registered, VAT applies to your taxable sales — for a restaurant, that is essentially the food and drink you sell. The standard rate in Nepal is 13%. The key questions in practice are how you present it and whether it is included or added on top.

There are two common approaches:

VAT-inclusive pricing — your menu price already contains the 13%. A Rs 226 coffee is Rs 200 plus Rs 26 VAT. The customer sees a round menu price; the bill breaks out the VAT portion.
VAT-exclusive pricing — your menu shows Rs 200 and the 13% is added as a separate line at the bottom.

Both are used in Nepal. Inclusive pricing tends to feel friendlier to customers because the shelf price is the price they pay; exclusive pricing makes the tax explicit. Whichever you pick, be consistent and make sure the maths on the printed bill is correct and clearly labelled.

Service charge is not VAT

This trips up owners and customers alike. Service charge and VAT are two different things.

Service charge is a charge the restaurant adds for service, commonly 10%. It is your revenue (typically pooled and distributed to staff, subject to labour rules). It is not a government tax.
VAT is a government tax at 13% that you collect on behalf of the state and remit to the IRD.

The order of calculation matters and should be consistent. A widely used sequence is:

Subtotal of items — say Rs 1,000
Add service charge at 10% — Rs 100, giving Rs 1,100
Add VAT at 13% on that amount — Rs 143, giving a total of Rs 1,243

Whether VAT is calculated before or after service charge, and exactly how service charge is treated, is something to nail down with your accountant so every bill you print is defensible. The important thing for the customer’s trust is that each line is labelled and adds up.

What an IRD-compliant bill should show

A compliant tax invoice is not just a total scribbled on a pad. As a general expectation, a VAT bill should clearly show:

Your business name, address, and PAN/VAT number
A unique, sequential invoice number and the date
A line for each item with quantity and price
The subtotal, any service charge, and the VAT amount shown separately
The grand total

Sequential invoice numbering matters. Bills should run in an unbroken sequence, and you should not be able to quietly delete one from the middle. If a sale is voided or refunded, that should be recorded as a void or credit — not by making the original bill vanish. Some businesses in Nepal are also required to use IRD-approved or registered billing software with specific controls; whether that applies to you depends on your category and turnover, so check.

The simplest test: could you hand any bill from any day to an auditor and have the sequence, the maths, and the tax lines all make sense? If yes, you are in good shape.

This is one of the strongest reasons to bill on software rather than a pad. A POS like GoServe keeps invoice numbers sequential, records voids instead of hiding them, and prints a clean bill with your PAN, itemised lines, service charge, and VAT laid out the way an auditor expects — which turns tax time from a scramble into a report you can just export.

Keep records you can actually produce

Compliance is not only about the bill you hand the customer — it is about the trail behind it.

Keep your sales records (all invoices, in sequence) and your purchase records (bills from suppliers, ideally with their VAT invoices so you can claim input VAT).
File your VAT returns on time. Late filing attracts penalties, and they add up.
Reconcile daily so your recorded sales match your actual cash and digital takings. If your books say one thing and your end-of-day count says another, fix it while you still remember why.
Hold on to records for the retention period the law requires — again, confirm the current duration.

Common pitfalls

Charging VAT without being registered. If you print “VAT 13%” on bills but are not a VAT-registered business, you are collecting a tax you are not authorised to collect. Do not do this.
Hiding sales to reduce tax. Under-reporting cash sales is common and genuinely risky. Digital payments through eSewa, Khalti, and banks leave a trail regardless, so a gap between your digital receipts and your declared sales is exactly what draws scrutiny.
Confusing customers with unlabelled charges. A total that is mysteriously higher than the menu prices, with no breakdown, reads as a scam even when it is honest. Label every line.
Breaking the invoice sequence. Gaps and deletions in your bill numbers are a red flag. Void properly instead.
Assuming last year’s rules still apply. Rates, thresholds, and software requirements get updated. Build a yearly habit of checking with your accountant.

Keep it clean and it stays simple

Compliant billing is not about being clever — it is about being consistent and transparent. Decide how you present VAT and service charge, print bills that show every line clearly with your PAN and a sequential number, keep both your sales and purchase records, and file on time. Do that and an IRD review becomes a formality rather than a crisis.

If you want billing that keeps your invoice sequence, tax lines, and daily totals clean by default, see our pricing or talk to us and we will show you how GoServe handles it.