Kathmandu, January 26

Eating out has become a less costly affair for patrons in the country from today as the Supreme Court prohibited hotels and restaurants from levying 10 per cent service tax in their bills.

Acting on a writ petition filed by President of National Consumer Forum Prem Lal Maharjan, a five-member constitutional bench led by Acting Chief Justice Hari Krishna Karki issued a directive yesterday asking hotels and restaurants to scrap the service tax with immediate effect.

Based on the provisions of Section 87 (3) of the Labour Act 2017 and Rule 82 of the Labour Regulations 2018, hotels and restaurants had been charging customers an extra 10 per cent service tax.

The constitutional bench of the SC, however, declared provisions of the Labour Act and Regulations null and void as they were in conflict and not compatible with the spirit of Article 44 and Article 115 (1) of the Constitution of Nepal.

Demanding the cancellation of the 10 per cent service tax, Maharjan had registered a writ petition on 8 October 2018 against the Ministry of Labour, Employment, and Social Security.

'The Labour Act and Regulations were amended with pressure from trade unions and sister organisations of political parties,' Maharjan said, adding that the provision of the service tax was unconstitutional and politically driven.

'Out of the 10 per cent service fee collected from the consumers, the employee or labourer of the related establishment used to get 6.8 per cent and the related business establishment 3.2 per cent, which was very contrary to the interest of the public and consumers,' he added.

According to him, all the sectors have now been barred from charging service tax.

A version of this article appears in the print on January 27, 2023, of The Himalayan Times.