Income Tax Act, 2058: PAN & VAT Registration Explained

What this law means for your business, in 3 points

• No PAN, no legal invoicing: you cannot issue a valid invoice, open a business bank account, or bid on a government tender without one.
• VAT registration has a hard turnover threshold: cross it and registration becomes mandatory, not optional.
• PAN itself is free: only VAT compliance (monthly filing) adds ongoing accounting overhead.

VAT registration thresholds

Business type	Threshold
Service-based business	Rs. 30,00,000 annual turnover
Trading / goods business	Rs. 50,00,000 annual turnover

Crossing either threshold makes VAT registration mandatory under the Income Tax Act, 2058 (and the VAT Act). You can also register voluntarily below the threshold, useful if your clients are VAT-registered businesses expecting VAT invoices from you.

What Inland Revenue requires for PAN registration

• Certificate of Incorporation
• MOA & AOA
• Citizenship certificate of directors
• Proof of registered office address

Common mistakes we see

1. Trading without PAN while "sorting out the paperwork later": this is a compliance violation from day one, not a grace period.
2. Registering VAT too early, adding monthly filing overhead before it's legally required.
3. Missing the threshold crossover: turnover is cumulative across the fiscal year, not reset monthly.

Need this handled for you?

We register your PAN alongside company incorporation, and advise on the right time to add VAT. See our PAN & VAT service →