Service charge: Why put the consumer in a conflict with eateries?

Soumyajit Mahapatra, a consultant engineer went with his family on New Year's Eve dinner in an up-market restaurant at Connaught Place. Like other customers, he too paid service charge. Had it been two days later, he would have saved himself some money. The government has now made service charge at eateries optional.

However, there’s still some confusion. The government notification puts the onus of deciding whether to pay this ‘service charge’ or not on the consumer. The ‘discretion’ is likely to leave him or her at the receiving end.

Representational image. Agencies

Representational image. Agencies

The Ministry of Consumer Affairs, Food and Public Distribution hasn’t issued any prohibitory order to stop hotels and restaurants from levying service charge on bills.

“It’s a conflicting situation now. Government should have clearly asked the hotels, restaurants and eateries not to impose service charge henceforth. Should I now fight with restaurant management, if they ask me to pay this additional charge? If they don’t agree to withdraw, what am I supposed to do?” questioned Mahapatra.

The hotels, restaurants and eateries charge 5-20% of ‘service charge’ in lieu of tips, which is not a government tax or cess. The service providers charge as per their will and discretion, because there’s no directive from tax authorities on the charge.

What option does a consumer have if compelled to pay?

“Register your complaint with the police,” advised noted consumer activist and founder, Consumer Online Foundation, Bejon Misra.

Citing a clause of The Consumer Protection Act 1986, Misra said, “As per the Act, it’s illegal and falls under unfair trade practice, because consumers often are not aware of it. A customer can return the bill asking the restaurant owner to remove service charge. In case a customer is compelled by the restaurant to pay this additional charge, s/he should call police helpline at 100 and register complaint against the service provider.”

What does the Consumer Protection Act 1986 say?

The Act 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.

In such cases, the act further states that a consumer can make a complaint to consumer forum.

Service providers versus consumers; government silent

National Restaurant Association of India (NRAI), a body representing more than one lakh restaurants and eateries across India said in its statement, “Inclusion of service charge in a restaurant bill is a common and accepted practice…It is a matter of policy for a restaurant to decide if service charge is to be levied or not. Information regarding service charge is to be clearly mentioned by restaurants on their menu cards, so that customers are well aware of this charge before availing the services… and one can use their discretion of not using the facility offered by the restaurant.”

The government in its notification has not mentioned waiving off the charge and has left it on customers.

“Government should have clearly spelt out on this issue. It can’t be half-hearted – saying if a customer is not satisfied with the service, he may refuse to pay the charge. What’s the criteria of satisfaction? This will lead to dispute between a customer and a restaurant owner. Moreover, as a restaurant association has claimed that it should be mentioned in a menu, should one go inside a restaurant, check a menu and then leave, if one isn’t ready to pay the charge? If government considers it as an unfair trade practice, it should issue order to waive it off completely,” remarked west Delhi resident Karan Agrawal.

What the restaurants abroad follow

“The restaurants and eateries abroad clearly mention at the entry points—gates or windows, what they offer and charge. This should be adopted in India. The service charge shouldn’t be levied secretively or mention it in the menu,” added Misra.


Published Date: Jan 03, 2017 05:23 pm | Updated Date: Jan 03, 2017 05:23 pm


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