Service charge at hotels: Don’t be fooled by govt notification, it has just passed the buck

The Department of Consumer Affairs has clarified that the extant practice by posh restaurants of adding service charges often ranging between 5 to 20 percent in lieu of tips isn’t mandatory and hence can be waived by the consumer if she is not happy with the services provided by the restaurant.


Several bloomers spring from this clarification to the states which in turn has been asked to rein in restaurants coming under their jurisdiction:

• First, waiver presupposes business as usual insofar as billing is concerned. If it is voluntary as it ought to be, why should it be billed at all in the first place? Why should the consumer be embarrassed in full public view to grovel before the billing clerk and explain to him whether she was satisfied with the services or not and how much of the service charges billed she considers reasonable?

Representational image. Reuters

Representational image. Reuters

• Second, a sizeable percentage of customers would prefer to swallow the service charges as part of the bill instead of facing the embarrassment of confronting the billing clerk with fellow diners’ gaze falling on them. They may rationalize that it is perhaps the done thing to comply though your heart says you must not;

• The time lost in this rigmarole would be considerable. A consumer is often in a mood to leave immediately after a leisurely meal. Arguing before the billing clerk might take five to ten minutes. And if the consumer has been successful, she would be asked to wait till a fresh bill is raised and printed because tinkering with the first bill might arouse the suspicion of both the management and the service tax department;

• Fourth, displaying conspicuously the law that service charges are voluntary and that it is contingent upon services being found satisfactory is a farce. If displayed at the entrance, it would be the most embarrassing welcome a restaurant can extend to its customers and if displayed on the table, it might put an end to the appetite of the hungry family! Displaying the information that the staff in the restaurant is mandated to wash their hands after each visit to the washroom is confidence building whereas the display of the law on tips may well end up dispiriting the consumers.

In any case, when something is voluntary and not mandatory, there is no way it can be billed. What the department of consumer affairs ought to have done is to declare the practice illegal, liable to a severe penalty under the consumer protection law.


In the US, it is for the consumer to add a tip to the bill. The bill thus embellished is then taken away by the waiter to the cashier who swipes the card to charge the customer both for the cuisine and the services. This is as it should be. Tipping is entirely a voluntary act. Convention in the US requires a generous 10 percent tip be added at the risk of being given a cold stare. But if you do not mind the brief hostility post eating especially if you are not contemplating another visit to the same restaurant, it is par for the course. There is a danger though with this practice----there is no guarantee that the management would split the tips thus collected officially among the waiters doing the duty!

Prime Minister Modi who has been spearheading the digital payment campaign perhaps would not mind a limited deviation in favor of tips to the waiters being paid in cash because only that ensures that tipping remains voluntary in letter and spirit and reaches the intended beneficiary---the one who has attended on you.

While mandating tips or its euphemism - service charges, being kept out of the billing process, the department of consumer affairs should mandate one US practice----providing a takeaway box for the leftovers. This is premised on the logic that the consumer having paid is entitled to eat what he bought either within the restaurant then and there or take a part of it home for eating when he experiences fresh hunger pangs. And let not the restaurants add cost of packing for the takeaway.


Published Date: Jan 03, 2017 07:39 am | Updated Date: Jan 03, 2017 08:44 am



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