Tax on E-commerce & Online Selling in Nepal (Daraz, Sastodeal, Facebook Shops & More)

Online selling has exploded across Nepal over the last few years. From full-time sellers running storefronts on Daraz and Sastodeal to home-based entrepreneurs selling handmade goods through a Facebook or Instagram page, digital commerce has become a genuine source of income for thousands of Nepalis. But one question keeps coming up again and again: is this income taxable, and if so, how?

The short answer is yes — income earned through e-commerce and online selling in Nepal is taxable under the Income Tax Act, 2058, just like income from any other business activity. The platform you sell on (Daraz, Sastodeal, a personal website, or a social media page) does not change your underlying tax obligation. What changes is how that obligation gets triggered and tracked. This guide breaks down PAN/VAT registration requirements, how marketplace TDS works, invoicing duties, and the often-overlooked tax position of social media sellers.

1. PAN and VAT Requirements for Online Sellers

Any individual or entity carrying on a business — including selling goods or services online — is expected to obtain a Permanent Account Number (PAN) from the Inland Revenue Department (IRD). A PAN is the baseline requirement; it is what allows you to file returns, issue bills, and be recognized as a legitimate taxpayer.

VAT registration becomes mandatory once your annual turnover crosses the threshold prescribed under the VAT Act for goods and service transactions, or if you deal in specific goods/services that require compulsory VAT registration regardless of turnover. Many casual sellers assume that because they operate "informally" through a marketplace or social media, VAT rules don't apply to them — this is a misconception. Turnover is turnover, whether it is recorded through a formal invoice book or through order confirmations on a mobile app.

Practical takeaway: if you are consistently generating sales — not a one-off garage sale of used items — you should register for PAN early. It protects you from penalties and makes it far easier to formalize VAT registration later if your turnover grows.

2. TDS Deducted by Marketplace Platforms

Large marketplace platforms operating in Nepal, such as Daraz, function as intermediaries that collect payment from buyers and then settle amounts owed to individual sellers. Under prevailing tax provisions, such platforms may be required to deduct Tax Deducted at Source (TDS) on payments made to sellers before releasing the seller's proceeds.

This TDS is not a final tax — it is an advance payment against your total tax liability for the year. When you file your annual income tax return, the TDS already deducted by the platform is adjusted (credited) against the tax you actually owe on your total business income. If the TDS deducted exceeds your final liability, you may be eligible for a refund or a carry-forward credit.

Sellers should keep a careful record of settlement statements or seller-center reports issued by the platform, since these documents typically show the gross sale amount, any commission or fees charged by the platform, and the TDS deducted. These records are essential when reconciling figures at the time of filing.

3. Invoicing Obligations for Individual Sellers

Even if you are a solo seller running your business from home, you are generally expected to issue a proper bill or invoice for each sale once you are registered under VAT, and to maintain basic transaction records even before VAT registration. A proper invoice typically includes the seller's name/business name, PAN (and VAT number if registered), date of transaction, description of goods, quantity, rate, and total amount.

Failing to issue invoices, or issuing informal handwritten slips without the required details, can create complications during tax assessment and may expose the seller to penalties for non-compliance. As your online business grows in volume, moving to a simple digital invoicing tool — even a spreadsheet-based system — can save significant time and reduce errors compared to manual bookkeeping.

4. Social Media (Facebook/Instagram) Shop Tax Obligations

A large and fast-growing segment of Nepal's online commerce happens entirely through Facebook pages, Instagram shops, and messaging apps, with payment collected via bank transfer, mobile wallets, or cash on delivery. Because there is no formal "marketplace" deducting TDS in these cases, many sellers assume their income falls outside the tax net entirely.

This is incorrect. The absence of an intermediary does not remove your obligation to declare income and pay tax on it — it simply means there is no automatic TDS deduction happening on your behalf. As a social media seller, the responsibility to register for PAN, maintain records of sales, and file returns rests entirely on you. Tax authorities have also increased scrutiny of digital payment trails (bank statements, wallet transaction histories) over recent years, which makes self-declaration the safer and more sustainable path compared to remaining unregistered.

Frequently Asked Question

Does a home-based seller with low turnover need to register?
Yes, in principle — PAN registration is expected of anyone conducting business activity for profit, regardless of scale. VAT registration specifically becomes mandatory only once your turnover crosses the prescribed threshold or if your goods/services fall under compulsory VAT categories. Even below that threshold, however, it is good practice to register for PAN and maintain basic sales records, since this protects you if your business grows faster than expected and makes tax filing far simpler when the time comes.