Businesses fleecing consumers

Kathmandu, March 26

It is illegal on the part of restaurateurs, shopkeepers and departmental store owners to charge 13 per cent value added tax on the price of any food item mentioned in the menu or the tag price of a product. But this trend of levying VAT on the tag price is rampant in Nepal as sellers fleece gullible customers, adding additional tax burden on them.

The Inland Revenue Department has clearly stated that value added tax must be included in the menu or tag price. This means if a VAT-compliant firm is selling something for Rs 100 then that price should also include VAT. But a number of departmental stores, restaurants and eateries, especially in the capital, have been adding VAT to the tag price, sales price or menu price.

In September, IRD had issued a directive to traders to publish rates of goods and services that are inclusive of all taxes, including VAT and other taxes. However, renowned restaurants such as Bakery Café, Indreni De Café and Royal Alina’s Bakery Café, as well as supermarkets, have been charging VAT on prices mentioned in their menu or retail prices of their services and products.

Traders have been adding VAT and other taxes on top of the tag price of products or services, which in a way is deceiving consumers, who are obliged to pay more than the advertised price.

Even IRD officials acknowledge that traders, especially in the restaurant business and supermarkets, have been adding taxes on top of tag prices, which is illegal. “Following a number of complaints regarding such cases, we had clearly directed traders to make tag prices of products and services inclusive of all taxes and the trend of adding taxes on top of menu prices of products and services is gradually declining,” said Yagya Prasad Dhungel, information officer at IRD. He added that the department would intensify market inspection in bid to curb such practices.

Meanwhile, even the Restaurant and Bar Association of Nepal — the umbrella organisation representing the country’s restaurants — has stated that restaurants and hotels must advertise prices on their menu that are inclusive of all taxes, including VAT. “Usually, restaurants mention that the advertised menu price is exclusive of taxes somewhere in the menu in small font, which in a way is deceiving customers. This trend has to be stopped and we have been urging restaurants and hotels to mention prices in the menu that are inclusive of all taxes,” said Araniko Rajbhandari, general secretary of REBAN.