In a landmark ruling, the Kathmandu District Court has ordered resorts, hotels and restaurants not to charge their customers more than the price that has been listed in their menu.

The court has decided that no additional amount can be charged on the bill in the pretext of Value Added Tax (VAT) and Service Charge.

The decision was taken by Justice Basudev Poudel while delivering the verdict on a consumer case filed by journalist Madan Dhungana on August 21 against Green Valley Getaway Resort in Budhanilkantha for adding service charge and VAT to the menu price on January 6.

The court ruled that businesses collecting 13 percent value added tax (VAT) and 10 percent service charge from the customer or adding any other extra charge to the bill, which the businesses have been adding, violates the Consumer Protection Act, 2075 and the Value-Added Tax Rules, 2053.

The court also ordered Green Valley Getaway to pay Rs. 10,000 to Dhungana as compensation.

According to advocate Manish Kumar Shrestha who handled the case, the landmark verdict has established a legal basis that if any restaurant or hotel charges more than the menu price, it will be deemed cheating.

“Customers too need to be aware of such issues and file a case instantly if they are charged more than the menu price. The tax office needs to notify all its offices in the country that restaurants and hotels should not add extra costs to the menu price and strict inspection needs to be done in restaurants and hotels so that consumers do not get cheated,” Shrestha said.

The business owners can be jailed for three to six months and fined NRs. 200,000 to NRs. 250,000, if they are found to be guilty.

The hotels and restaurants have been levying a service charge on food and beverage bills since 2007 after service charge system came into force on January 1, 2007.

Since then, hotel and restaurant customers have been paying 24.3 percent more than the menu price—10 percent compulsory service charge, 13 percent VAT and 1.3 percent service tax. The VAT and service tax go to the government. Similarly, 72 percent of the service charge goes to employee and other to employers and associations.