The practice of levying a separate service charge over and above the price of food in restaurants and eateries has come under the scrutiny of the government, with the Central Consumer Protection Authority (CCPA) issuing guidelines stating that the charge is based on the discretion of the customer and is optional.
The CCPA is under the Union Ministry of Consumer Affairs, Food and Public Distribution.
Service charges were levied as a percentage of the total bill. Often, this was levied with Goods and Services Tax (GST) additionally added to the service charge. This practice too has been called out by the notification.
This notification has been issued under the Consumer Protection Act, 2019. It reasons that as a component, services are already factored into the price of the food that restaurants charge the consumer, and they have no restrictions on pricing their food. When a customer places an order, it inherently involves consent to pay whatever is printed on the menu, plus additional taxes. The notification states that levying anything other than this amount constitutes an unfair trade practice under the Act.
Further, tips or gratuity is at the discretion of the customer, which the notification states is a separate transaction. Customers are in a position to pay this only after completing a meal, based on their assessment of the quality of the services received, and cannot be levied simply based on them entering a restaurant and ordering a meal.
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The notification states:
- Hotels and restaurants cannot levy service charges automatically, and it cannot be forced upon the customer
- Restaurants must convey that the charge is voluntary and optional
- Entry cannot be restricted, or restrictions on services provided shall not be imposed based on the service charge
- The service charge cannot be levied in any other name, and it cannot be added with the bill with GST being imposed on it
Customers may ask the restaurant to remove the service charge from the bill amount.
The umbrella body for restaurants in India, the National Restaurant Association of India, seemingly decried the government's interference in the issue in the past. Their website carries an editorial in the Indian Express as of June 8, where the author argues against the government banning the explicit levy of service chargers in restaurants. The story equates it to convenience fees in ticketing platforms, restaurant charges in food delivery platforms and even processing fees for government transactions. Service charges act as incentives for staff, in lieu of tips, and it remains voluntary, the story states, which is clearly marked as a separate component and is waived upon customer request.
What redressal options do I have?
The notification provides the following ways through which customers can lodge their complaints:
- The National Consumer Helpline (NCH): 1915, or the NCH mobile app
- Filing a complaint online through E-Daakhil which can be viewed here.
- Filing a complaint with the District Collector. A complaint can also be emailed to the CCPA at com-ccpa@nic.in
The notification can be found here.
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