Service Charge in Restaurants: Centre to convene meeting with restaurant owners over levy of service charge

Service Charge in Restaurants: The Union Consumer Affairs Ministry has called for a meeting with the National Restaurant Association of India (NRAI) on June 2, 2022 to discuss the issue related to the levy of service charge by restaurants. This comes after Consumer Affairs secretary Rohit Kumar Singh wrote to NRAI, saying that the restaurants are collecting service charges from consumers by default, often fixed at arbitrarily high rates. 

The Consumer Affairs Secretary in his letter summoned the NRAI for discussions over the continued imposition of service charge on the food bill saying that restaurants are forcing consumers to pay the service charge even though its collection is voluntary, at the discretion of consumers and not mandatory as per law.

He cited the Ministry's guideline issued in 2017 and stated forcing consumers to pay service charge as a condition precedent to placing their order amounts to a “restrictive trade practice” under the Consumer Protection Act. He also pointed out that consumers are being misled on the legality of such charges and even harassed by some restaurants when they make requests to remove such charges from the bill amount.

He further said that since the issue impacts consumers on a daily basis and has significant implications on consumer rights, the department thought it to be necessary to examine it with closer scrutiny and detail.

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Centre's meeting over Service Charge Issue: Key Agenda

The Ministry will be highlighting four key issues related to service charge levied by restaurants during the meeting: 

-Restaurants making service charge compulsory

-Adding service charge in the bill in the guise of some other fee or charge

-Suppressing information from consumers that service charge is optional and voluntary

-Embarrassing consumers in case they resist from paying service charge

The Ministry's statement read that the guidelines note that "entry of a customer in a restaurant cannot by itself be construed as a consent to pay the service charge. Any restriction on entry of the consumer by way of forcing her/ him to pay the service charge as a condition… to placing an order amounts to ‘restrictive trade practice’ under the Consumer Protection Act”.

The Ministry's statement further stated that placing of an order by a customer amounts to their agreement to pay the prices displayed on the menu along with the applicable taxes and charging for anything else without their consent would amount to unfair trade practice as defined under the Act.

What is Service Charge in Restaurants?

Service Charge in restaurants is an additional amount that the customer has to pay as a part of the final bill for the service of the serving staff. The service charge is 10 percent of the total bill. 

Is Service Charge Compulsory in Restaurants?

Despite the government saying that service charge is voluntary, many restaurants make paying the service charge on the final bill compulsory. While some restaurants waive off the service charge upon being asked by the diners, others are more rigid and refuse to remove it or create a hassle when the customer makes the request.