Nepal's Communist government Tuesday formally withdrew the controversial Guthi bill from the National Assembly following the weeks-long intense protest by the ethnic Newar community which feared that it could jeopardise Sanatan Hindu tradition.

A proposal on annulment of the bill tabled by Minister for Land Reforms Padma Aryal was endorsed unanimously at the National Assembly, the upper house of Parliament.

Prime Minister K P Sharma Oli-led government had tabled the Guthi Bill in Parliament to amend the Guthi Act and nationalise both public and private guthis or trusts and regulate all religious sites under a powerful commission.

Fearing that the government's move could jeopardise Sanatan Hindu tradition, the ethnic Newar community staged weeks-long protests demanding to scrap of the bill.

Following intense protests, the Nepal government withdrew the controversial bill from Parliament, but the protestors demanded to scrap of the bill.

The much-talked-about bill on the management of lands belonging to Guthis or religious and social trusts courted controversy with people from various walks of life, mainly the Newar ethnic groups of Kathmandu demanding its withdrawal.

Last week, around 50,000 people rallied in Maitighar Mandala of Kathmandu protesting against the government's move to introduce the bill aiming to bring the private and public trusts under a powerful commission.

The agitators have argued that the proposed law would turn public guthis (trusts) into a 'playground for politicians, government officials and influential people who wish to embezzle thousands of hectares of guthi land'.

The system, known as "guthi", is rooted within the Newar community indigenous to the Kathmandu Valley.

It has a special role in maintaining temples and traditional public spaces and organising festivals and religious parades.

Nepal has over 2,000 public guthis under an independent umbrella body which currently oversees the trusts.

Guthis, usually led by families or specific communities, generate income from commonly owned lands.

The current government came to power after a resounding victory in the 2017 elections, winning a strong majority in both houses of Parliament and six of the seven provincial assemblies.