Cancellation of 10 percent service fee charged by hotels and restaurants

The Supreme Court has decided that hotels and restaurants cannot collect service charges from customers.

Hotels and restaurants have been charging an additional 10 percent service fee from customers based on the provisions of Section 87 (3) of the Labor Act 2074 and Rule 82 of the Labor Code 2075. But the Supreme Court said that the spirit and purpose of Article 44 and Article 115 (1) of the Constitution were not compatible and declared those provisions of the Labor Act and Regulations to be invalid and null and void with effect from January 11th.

On Wednesday, the Constitutional Bench of Permanent Chief Justice Harikrishna Karki, Justices Vishwambhar Prasad Shrestha, Ishwar Prasad Khatiwada, Anand Mohan Bhattarai and Anil Kumar Sinha gave a verdict on the writ filed by Premlal Maharjan on 23rd June, 2075 demanding cancellation of service fee.

In the judgment, it is said, ‘Since the employer cannot collect the fee based on the collective agreement except in the cases where the law made by the legislature clearly and clearly authorizes the collection of the fixed rate of the fee, the act of collecting the fee amount according to the collective agreement shall not be allowed, delayed, and that type of action shall be stopped immediately. In the name of the defendants, it is considered that a mixed order of prohibition will also be issued.

With this decision, now hotels, lodges, motels, restaurants, food courts and similar businessmen who provide food, lunch and snack services will not be able to collect 10 percent service charge on the price of food and snacks sold to customers.

“Workers/employees, owners and political party activists were eating by collecting 10 percent of the service fee from the consumers,” said the writ petitioner Marhajan, “now it has been canceled with the Supreme Court’s decision.”

In Section 87(3) of the Labor Act, 2074, there is a provision that employers who operate hotels, motels, restaurants, jungle safaris or other businesses must distribute the amount of service charge taken in accordance with the collective agreement as specified. Similarly, in Rule 82 of the Labor Regulations, 2075, there is a provision to distribute the service fee collected from the customer.

In which, 71 percent of the amount collected from the customer for service fee is distributed to the workers, 24 percent to the employer for breakage and operational leakage, 2.5 percent to the employer’s organization related to the hotel business and 2.5 percent to the workers’ trade union.

The Constitutional Bench has ruled that charging service fee in this way is against Article 44 of the Constitution. It is written in Article 44, “Every consumer shall have the right to receive quality goods and services.” A person who has been damaged by quality goods or services will have the right to compensation according to the law.

The Supreme Court has mentioned that the amount of the service fee collected from the consumer is kept by the employer, the employer and the workers’ organization, but the consumer has suffered financial loss. It is said in the judgment, “There is a situation where even the responsibility of the loss incurred by the businessmen is placed on the consumer.” It is clear that the consumer will be subject to additional and unfair obligations.

It is further stated in the verdict, “Since tax will be charged on the price to be determined after this, it has become apparent that the tax liability on the consumer is not based on the law created by the legislature but on the collective agreement made by the employer.”

Article 115 (1) of the Constitution mentions that no tax shall be levied except in accordance with the law. It is mentioned in the judgment of the Supreme Court that it is illegal to add an additional 10 percent to consumers in the name of collective agreement between employers and workers in hotels and restaurants.

Source: Janakpur Today Daily

About Nepali Law

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