As Government relooks at Restaurant Service Charge, 37% consumers who went to an air-conditioned restaurant last month admit to paying it

May 24, 2022, New Delhi: The Department of Consumer Affairs today issued a statement cautioning restaurants on forced charging of “Service Charges” in the bill. The release issued by the Government said that restaurants and eateries are collecting service charge from consumers by default even though collection of any such charge is voluntary and at consumers discretion and not mandatory as per law.

LocalCircles since 2017 has been regularly creating awareness on the issue raising it the first time in late 2016. To understand what consumers were experiencing, LocalCircles was conducting a survey since the beginning of this month. The survey received 7,027 votes from consumers located in 271 districts of India and all these consumers had visited an air-conditioned restaurant in the last 30 days.

When consumers were asked via the survey whether there was a service charge levied on their bill. It also sought to understand if they paid the service charge or got the restaurant to remove it. In response, 37% consumers said that when they visited an air-conditioned restaurant in the last one month, the restaurant charged them a service charge in the bill, while 7% said that the restaurant charged it, but they got it removed. Only 23% said the restaurant did not charge it at all and 33% did not pay attention to the bill.

The findings indicate that only 23% air-conditioned restaurants are not levying such a charge on the bill which indicates that most may still be levying this charge on the bill. Service Charge is classified as an unfair trade practice and previously the Department of Consumer Affairs issued several advisories to restaurants in 2017-2019 so this practice stops. However, the practice continues to this date as indicated by the survey.

Since LocalCircles has tracked the issue since 2017, when it compared the results for 2017, 2018 and 2022, it is clear that the campaign against forced service charge that gathered momentum in 2018 has fizzled away. In May 2017, 27% consumers did not pay a service charge which went up to 39% in May 2018 and is currently at 30% now.

Now with the Consumer Protection Act 2019 being in force, the CCPA should issue an order against levying of service charge by air-conditioned restaurants. This will resolve the issue both for consumers as well as give clarity to restaurants. LocalCircles will share the findings of this report with the Department of Consumer Affairs and the CCPA for action.