Are expenses incurred without PAN bill deductible?

Last Fiscal Year Nepal Government declared that every expense must have either a PAN/VAT invoice or paid to those registered in PAN/VAT. This was a surprise and was throwing most of the malpractices out of the bus. The fraudulent activities such as ghost employees, procurement through unregistered mom & pop stores, and most importantly, all the informal/casual/daily workers who were paid out in cash and had no legal records to demonstrate those exist. 

It was indeed a good initiative but at the same time government didn't take into account the ground reality. It was and still is hard to find someone registered in tax in rural areas of the country including those working in daily wages or as casual workers. I, personally, think that all the business entities need to get registered and the government shouldn't give them an option. But, even, if we wanted to have all those individuals having the income to file a self-assessment, it might not be feasible for daily workers. Unless, government comes with the unique identity number for each individual which is used for all the activities, such as social security number used in the US.

The introduction of such provision created huge hue and cry within the business community. It looks like the government has been pragmatic. The government has continued to discourage using the individuals or procuring from individuals /entities without tax registration but at the same time given some flexibility. We can find two special provisions in Finance ordinance (2077) laying out the criteria where expenses incurred without PAN are eligible for deduction from the taxable income for business or investment.

1) The first provision is about the payment of daily wages. It states that payment of wages made to individuals without registration in PAN will be allowed up to maximum NRs. 3,000.

2) The second provision is about the procurement of agro, forest, animal products and domestic produce from an individual not involved in business activities and doesn't have a PAN bill/invoice. Any such procurements without invoices will be allowed up to maximum NRs. 2,000. 

The provision in Nepali reads as follows:

1) कुनै व्यवसाय वा लगानीबाट भएको आय गण्ना गर्ने प्रयोजनको लागि पटके प्रकृतिको तीन हजार रुपैयाँसम्मको ज्याला भुक्तानी प्राप्त गर्ने प्राकृतिक व्यक्तिले स्थायी लेखा नम्बर नलिएको भए तापनि त्यस्तो खर्च कट्टि गर्न पाउनेछ ।

2) कुनै व्यवसाय वा लगानीबाट भएको आय गण्ना गर्ने प्रयोजनको लागि व्यवसायिक कारोबार नगर्ने प्राकृतिक व्यक्तिसँग सोझै गरिने कृषिजन्य, वनजन्य, पशुजन्य र अन्य घरायासी वस्तुको खरिद तथा स्थायी लेखा नम्बर उल्लेख नभएको दुई हजार रुपैयाँसम्मको बीजक बापतको खर्च कट्टि गर्न पाउनेछ ।