Hotel and Restaurants Cannot Levy Service Charge

After several complaints registered on National Consumer Helpline (NCH) by the consumers on levying of service charges by the eateries, The Ministry of Consumer Affairs, Food and Public Distribution, India, held a meeting regarding this issue. As per the meeting held on June 2, 2022, the government said there is no need to levy service charges on the eateries. It is purely voluntary on the customer's end to pay the service charge or not. Despite this, even if the restaurants pressurise the customers or without the customer's willingness, the said restaurant will be investigated under Unfair Trade Practices.

The Central Consumer Protection Authority (CCPA), on Monday, 4th July 2022, prohibited hotels and restaurants from levying service charges automatically or by default on food bills. The CCPA also allowed the customers to file complaints in case of violation. The hotels must inform the customer that paying service charges is the consumer's choice. The guidelines further said that entry of the customer into the hotel/restaurant could not be construed as consent to pay the service charge.

Due to some misunderstanding, few customers consider GST as a service charge. Customers must comprehend that GST and service charges are different components of tax. Also, the restaurants must note that the Service charge cannot be collected by adding it along with the food bill and levying GST on the total amount.

Mr. Bijon Misra, a noted consumer rights activist and founder of the Consumer Online Foundation “Jago Grahak Jago” campaign, said that legal action could be initiated against the restaurant by CCPA. He also noted that “restaurants and hotels will start including the service charge in the price itself of menu list which could inflate the bill however the victory for the common man is that after this if anybody does not want to pay a service charge, he can’t be forced to do that.” Waiters and other hotels might be tempted to provide better service to the customer in the hope of a good tip.

The guidelines state that a component of service is inherent in the price of food and beverages offered by a restaurant or hotel.

According to an official statement, the decision was taken after several complaints were registered at National Consumer Helpline (NCH). The consumers complained that restaurants were making service charges compulsory and adding them to the bill. They also embarrassed the consumers if they hesitated to pay the service charge. 

Know your Rights: Quick Recap –

• Entry of customer cannot be construed as consent to pay the service charge.
• Eateries cannot add service charges automatically to food bills.
• Collection of service charges is voluntary and at the choice of consumers, not mandatory
• Service charge cannot be collected by adding it along with the food bill and levying GST on the total amount.

Edited By : Rah  

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