Restaurant Service Charge to become illegal

Friends on localcircles who literally raised the issue in 2016 got govt to issue guidelines congratulations to you.

The Govt is finally ruling service charge to be illegal. Congratulations. Someone said it right “overnight success takes 10 years, 5 is a good deal””

Centre to soon come up with a robust framework to check service charge levied by restaurants and hotels

Department of Consumer Affairs raises issues of service charge with stakeholders

Posted On: 02 JUN 2022 7:22PM by PIB Delhi
The Department of Consumer Affairs (DoCA) will soon come up with a robust framework to ensure strict compliance by the stakeholders with regard to service charge levied by restaurants and hotels as it adversely affects consumers on a daily basis.

The Department held a meeting here today with restaurant associations and consumer organizations on levy of service charge in hotels and restaurants. The meeting was chaired by Shri Rohit Kumar Singh, Secretary, DoCA.

The meeting was attended by major restaurant associations including National Restaurant Association of India (NRAI) and Federation of Hotel & Restaurant Associations of India (FHRAI) and consumer organizations including Mumbai Grahak Panchayat, Pushpa Girimaji etc.

During the meeting, major issues raised by the consumers on National Consumer Helpline of DoCA relating to service charge such as compulsory levy of service charge, adding the charge by default without express consent of consumer, suppressing that such charge is optional and voluntary and embarrassing consumers if they resist paying such charge etc. were discussed. Further, guidelines on fair trade practices related to charging of service charge by hotels/restaurants dated 21.04.2017 published by DoCA were also referred to.

The restaurant associations observed that when service charge is mentioned on the menu, it involves an implied consent of the consumer to pay the charge. Service charge is used by restaurants/hotels to pay the staff and workers and is not charged for the experience or food served to consumer by the restaurant/hotel.

Consumer Organizations observed that levying service charge is patently arbitrary and constitutes an unfair as well as restrictive trade practice under the Consumer Protection Act. Questioning the legitimacy of such charge, it was highlighted that since there is no bar on restaurants/hotels on fixing their food prices, including an additional charge in the name of service charge is detrimental to the rights of consumers.

As stated in the earlier guidelines dated 21.04.2017 published by DoCA, placing an order by a customer amounts to his agreement to pay prices in the menu along with applicable taxes. Charging for anything other than the aforementioned, without express consent of the consumer, would amount to unfair trade practice under the Act. Further, considering entry of a customer to a restaurant/hotel as an implied consent to pay service charge would amount to imposition of an unjustified cost on customer as a condition precedent to placing an order for food and would fall under restrictive trade practice under the Act.

Since this adversely affects millions of consumers on a daily basis, the Department will soon come up with a robust framework to ensure strict compliance by the stakeholders. more  

View all 10 comments Below 10 comments
Happy to be an active localcircles member more  
Maybe they can cap the service charge to certain amount (for e.g.: ₹100 - ₹200) and it should not be taxed. more  
Rules are there on papers but no check whether those rules are being implemented. more  
Fine, but how would you ensure that making service charges illegal has really caused financial benefits to the customers. Remember the period of 18% GST on restaurant bills and its reduction to 5%. What happened on reduction of the GST, did the customers were the beneficiaries of the tax reduction? The answer is simply no! The restaurant owners immediately made upward revision of the prices of their menus to deprive the customers of the benefits of tax reduction. Therefore, the government must ensure that this doesn't happen this time and to restrict this kind of mischievous acts of the hotel/restaurant owners, specific instructions must also be mentioned in the relative notification declaring any kind of upward revision in hotel tariffs and menu prices simultaneously illegal, with provisions for heavy punishment, financially and judicially. more  
Sir...there is always a difference between procedure and practice. Rules are made but never implemented and over & above no checks. more  
Excuse me everyone who reads this. Service charge in Mumbai and high end restaurants in Pune charge exhorbitantly. Sometimes 10%, others 12% on top of dishes being served at Rs.600 to 800 a dish which brings the bill up to a couple of thousands. Restaurants are supposed to be in the service of people and they are looting us with the price of the dishes then why should we pay extra service charge? They need to pay their staff from their profits not from the SC that we are supposed to pay. I am glad that the government will be taking up this issue and considering it illegal. Consumers in Mumbai have so much money that they just do not care!!!! more  
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