Supreme Court: Local Bodies Can't Tax Construction Material Transport
The Supreme Court has ruled that local governments cannot charge tax or fees on goods moved between local levels for road construction projects.
A joint bench of Justices Kumar Regmi and Shreekanta Paudel has ordered Shuklagandaki Municipality in Tanahun to refund Rs 8,219,818 collected from Chinese contractor Anhui Kaiyuan Highway and Bridge.
The company was transporting stone, gravel and sand for the western section of the Muglin–Pokhara road project, a national priority highway. It argued the movement was part of its own construction contract, not a commercial sale.
Court Cites Constitutional Bar on Double Taxation
The bench held that treating this as a commercial transaction and levying tax amounted to unconstitutional double taxation. It cited Article 236 of the Constitution, which bars taxes, fees or restrictions on movement of goods and services between provinces and local levels.
The Local Government Operation Act, 2074 and Shuklagandaki's own economic laws allow such charges only on commercial transactions. This case did not qualify as one, the Court said.
Refund Ordered, Future Levies Barred
The Court has ordered an immediate refund to the company. It has also directed authorities not to impose export tax or other charges on materials transported for road construction in future.
The bench pointed out that the municipality ignored a 2075 Cabinet decision and a directive from the Ministry of Federal Affairs and General Administration against such levies.
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