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Eat out, pay less: Government reiterates that service charge is optional

Sahil Bhalla | Updated on: 2 January 2017, 20:42 IST

2016 may not have ended on a good note, but 2017 has begun well, especially for food lovers across the country. The government, in response to multiple complaints from customers about service charge at restaurants, has, in a Press Information Bureau release on 2 January, said that the payment of service charge - which ranges from 5 to 20 percent - in a restaurant/hotel has "to be accepted voluntarily" by the customer.

The Central Government's Department of Consumer Affairs has asked for a clarification from the Hotel Association of India. They replied saying that the service charge is completely discretionary. Should the customer be dissatisfied with the dining experience that they had, they can then have it waived off.

"It is deemed to be accepted voluntarily," reads the release.

"The Consumer Protection Act, 1986 provides that a trade practice which, for the purpose of promoting the sale, use or the supply of any goods or for the provision of any service, adopts any unfair method or deceptive practice, is to be treated as an unfair trade practice and that a consumer can make a complaint to the appropriate consumer forum established under the Act against such unfair trade practices.

"The Department of Consumer Affairs has asked the State Governments to sensitize the companies, hotels and restaurants in the states regarding aforementioned provisions of the Consumer Protection Act, 1986 and also to advise the Hotels/Restaurants to disseminate information through display at the appropriate place in the hotels/restaurants that the 'service charges" are discretionary/ voluntary and a consumer dissatisfied with the services can have it waived off."

It's on the state government to ensure that the hotels and restaurants are aware of the new policy. In this context, notices informing the customer must be put up.

The curious case of service charge

Back in 2011, Debasish Roy wrote an article titled, "Service charge in restaurants is illegal".

It's no secret that restaurants have been levying a service charge for years now. When one walks into a restaurant, the first thing they see is the menu, where, at the bottom, in small letters, is the amount of service charge the restaurant levies. The customer(s) then decide what they want to order. "When you point out a certain item out of the menu and ask for it, you make an offer of money in exchange for the goods, which is that food item".

What you have agreed to pay for is the plate of food that has arrived on your table and nothing else. Service charge is different from service tax. Service tax is a government levied cess that you are mandated to pay by the government of India. Service charge was never a mandatory charge as per the government.

Lok Sabha reply

In a written reply to a question inside the Lok Sabha, the government declared the inclusion of service charge illegal and an unfair trade practice if the consent regarding the service charge is missing. The customer can file a complaint against the service and the Consumer Affairs Department will take action. With this notification, the reply has become official. In July of 2015, the Finance Ministry clarified that service charge is not equal to service tax on restaurant bills. Service charge was never legal, always unfair

Chandigarh leading the way

Back in 2014, and then again in 2016, the Chandigarh administration declared service charge illegal and said action will take place against those not adhering to the new rule. Then in 2016, Ajit Balaji Joshi, deputy commissioner, issued an order under Section 144 of the CrPC for two months.

Deputy Commissioner Ajit Balaji Joshi has issued an order to this effect under Section 144 of the CrPC for two months. "Levying of service charge will be treated an offence and owners of restaurants and hotels found violating the order will face action, including an FIR and jail term," read an article in The Tribune.

No other state in the country has declared service charge illegal.

Not the first time it has been brought up

In July of 2015, a complaint was registered against a restaurant in the Mulund area of Mumbai after lawyer Abhishek Nakashe complained to the police about a service charge of Rs 39 on his bill of Rs 525. Nakashe along with his sister was at Secret Spice restaurant. Abhishek inquired about the service charge as the menu never carried a mention of what percent was being levied.

Customers are happy

It seems that even though this isn't entirely new news (just official with a government notice), customers are a happy lot. Not having to pay 5-20%, and paying based upon what one feels is appropriate, is a good thing.

India is not the first to make service charge entirely voluntary and probably won't be the last. Paying based on how much one thinks is worthwhile is the way forward.

First published: 2 January 2017, 20:42 IST
Sahil Bhalla @IMSahilBhalla

Sahil is a correspondent at Catch. A gadget freak, he loves offering free tech support to family and friends. He studied at Sarah Lawrence College, New York and worked previously for Scroll. He selectively boycotts fast food chains, worries about Arsenal, and travels whenever and wherever he can. Sahil is an unapologetic foodie and a film aficionado.