Service Charge in Restaurant: Centre to issue framework to check service charge levy by restaurants

Service Charge in Restaurant: The Department of Consumer Affairs (DoCA) will soon introduce a robust framework to check service charge levied by restaurants and hotels. The framework will ensure strict compliance by the stakeholders with regard to service charge levy, as it affects consumers adversely daily.

The DoCA had held a meeting on June 2nd, chaired by DoCA Secretary Rohit Kumar Singh, with the restaurant associations and consumer organizations to discuss the issue of the levy of service charge in restaurants and hotels. The restaurants and hotels usually charge 10 percent service charge over the final bill.

The meeting was attended by major restaurant associations -National Restaurant Association of India (NRAI) and Federation of Hotel & Restaurant Associations of India (FHRAI) and consumer organizations.

READ: What is Service Charge in Restaurants?

Levy of Service Charge in Restaurants: Key Points from the Meeting 

• The government brought up major issues raised by the consumers on DoCA's National Consumer Helpline related to levy of service charge in restaurants and hotels during the meeting. 
• The officials also discussed the guidelines on fair trade practices related to the charging of service charge.
• The restaurant associations contested that when a service charge is mentioned on the menu, it amounts to the consent of the consumer to pay the service charge in their final. 
• They also observed that the service charge levied by restaurants and hotels is used to pay the staff and workers and is not charged for the experience or food served to the consumer.
• NRAI claimed in a tweet on June 2 that the service charge is still very much legal until final disposal. 

NRAI issues clarification on #ServiceCharge Issue.#DontGrudgeIt #ServiceChargeIsLegal #Restaurants #Restaurantindustry pic.twitter.com/hYy3Ar2nO4

— NRAI (@NRAI_India) June 2, 2022

• On the other hand, the consumer organizations observed that the service charge levy is patently arbitrary and is an unfair and restrictive trade practice under the Consumer Protection Act. 
• The centre questioned the legitimacy of imposing the service charge, highlighting that since there is no bar on restaurants/hotels on fixing their food prices, including service charge as an additional charge is detrimental to the consumers' rights. 

Department of Consumer Affairs Secretary Rohit Kumar Singh pointed out in a letter to NRAI that the restaurants and eateries are collecting the service charge from consumers by default, even though any such charge is voluntary and at the discretion of consumers. 

He also mentioned that consumers are falsely misled on the legality of such charges and harassed by restaurants on making a request to remove such charges from the bill amount. “Since this issue impacts consumers at large on a daily basis and has significant ramifications on the rights of consumers, the department construed it necessary to examine it with closer scrutiny and detail," the letter said.

READ ALSO: Is Service Charge Compulsory in Restaurants?

Background

The Department of Consumer Affairs had published guidelines in April 2017 on the levy of service charge by restaurants and hotels. The guidelines stated that the entry of a customer in a restaurant cannot be implied as a consent to pay the service charge.