Monday, May 21, 2018


Paying service charge at eateries optional, rules consumer affairs dept
Wednesday, 04 January, 2017, 08 : 00 AM [IST]
Ashwani Maindola New Delhi
The Department of Consumer Affairs has ruled that paying a service charge at a hotel or a restaurant is optional. The ruling was preceded by several complaints by consumers that the eateries were forcing them to pay a service charge, ranging between five and twenty per cent, in lieu of tips, regardless of the kind of service provided to them.

It added that under the Consumer Protection Act, 1986, a trade practice, which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or deceptive practice, would be treated as an unfair trade practice and that a consumer could complain to the appropriate consumer forum established under the Act against such unfair trade practices.

The department has called for clarification from the Hotel Association of India, whichreplied that the service charge was completely discretionary.

“Should a customer be dissatisfied with the dining experience, he/she can have the service charge waived off. Therefore, it is deemed to be accepted voluntarily,” it added.

The department has also asked the state governments to sensitise the companies, hotels and restaurants in the states regarding the aforementioned provisions of the Consumer Protection Act, 1986 and also to advise the eateries to disseminate information by displaying at appropriate placeson their premises that the service charges are discretionary/voluntary and a consumer dissatisfied with the service can have it waived off.

Reacting to the department’s order, the National Restaurant Association of India (NRAI)stated that the inclusion of service charge in a restaurant bill was a common and accepted practice, adding that various Central or state government departments had stated in various communications and public announcements that the same be included to calculate the total invoice value on which taxes are to be levied.

“There are even judicial pronouncements to support that service charge can be charged by hotels and restaurants. The same has been upheld by the National Consumer Disputes Redressal Commission (NCDRC), in Nitin Mittal vs Pind Baluchi, (2012) NCDRC 444; by Monopolies and Restrictive Practices Commission, New Delhi (MRTP) in 2001, and judgments passed by the Supreme Court in the cases of Wenger & Company and others vs Their Workmen (1963) and Ram Bagh Palace Hotel, Jaipur vs The Rajasthan Hotel Workers’ Union, Jaipur (1976),” it added.

“It is a matter of policy for a restaurant to decide if a service charge is to be levied or not. Information regarding the amount of service charge is to be clearly mentioned/displayed by restaurants on their menu cards or otherwise also displayed, so that customers are aware of this charge before availing the services and can use their discretion of not using the facility offered by the restaurant,” NRAI stated.

Anurag Katriar, executive director and chief executive officer, deGustibus Hospitality Pvt Ltd, said, “Levying service charge is an established practice dating back several years, and it has even been upheld in the court of law. Most of the money collected goes to the staff and is an integral part of their incomes. Discontinuation of the same at this stage will adversely impact millions of workers, and therefore, we plan to continue levying the service charge as before.”
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