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Service charge: Bureaucratic govt's half-steps have made a royal mess of a sticky issue

It's your wedding anniversary and you have invited a few of your close friends and family members for a gourmet meal at a fancy restaurant. However, the appetizers were cold, the main course too runny and the waiter kept you waiting for a tad too long. Dissatisfied with the experience, you choose to not pay the 20 percent service charge and end up colliding with the hotel management over the issue, resulting in complete ruination of your memorable day.

And even as you engage in a fight, a similar brawl has broken out at one more table between another disgruntled customer and the staff, who insist that patrons should have stayed away from the eatery if they didn't want to pay the service charge levied on their bill.

Representative image

Representative image

These and many such unsavory incidents may now become commonplace across eateries in India due to the government's muddled thinking and its penchant for taking half-measures that has exacerbated a sticky problem instead of providing a solution.

The Union Consumer Affairs Ministry could have simply abolished the service charge and reverted to the old custom of letting the customers decide on the quantum of tip. Instead, by making the charge optional while keeping vague key provisions, it has given rise to huge ambiguity that may now form the basis of countless quarrels or even litigation.

Even on a milder scale, this bewildering move will create a scenario where dissenting customers would either be forced to fight with eateries or pay the charge silently to avoid embarrassing situations. There is also a possibility that some restaurants may hike the bill fare in order to avoid potential trouble.

This is the hallmark of a government ruled by bureaucrats who excel in passing the buck when it comes to taking decisions and be held accountable for it.

As always, there can be few questions behind the government's motive. There have been widespread reports and customer complaints of many fancy standalone eateries institutionalising the "service charge" in lieu of tipping, forcing even unwilling customers dissatisfied with the "service" to cough up money ranging from five to 20 percent of the total bill.

This, according to the government, runs contrary to the Consumers' Protection Act, 1986, which deems as "unfair" any trade practice that adopts "deceptive methods" to promote the sale, use or supply of any goods or for the provision of any service, points out a report in The Hindu. If a customer so wishes, she may lodge an appeal at the appropriate forum.

So far, there is nothing wrong with the government's interpretation. In fact, the "service charge" (as opposed to service tax levied by the government) has become a handy excuse for restaurant owners who have shifted the onus of paying their staff on to their customers. While one owners' outfit, the Hotel Association of India (representing over 300 eateries) deems the charge as purely voluntary, another conglomerate says it is well within its rights to levy the extra charge.

According to a report in The Telegraph, FHRAI (formerly Federation of Hotel and Restaurant Associations of India) in a 5 December advisory to its over 4000 members had advocated a five to 20 per cent service charge as long as the levy is clearly mentioned on the menu card or at a prominent place, citing a stack of legal opinion and court orders in its favour.

Elsewhere, Riyaz Amlani, president of the National Restaurant Association of India (NRAI), has also argued in favour of the charge, proclaiming to Economic Times that "service charge is vital for the business model and for the employees. If you just give out tips, the service staff, the toilet cleaners, valet, kitchen helpers, dish washers don't benefit. In a uniform service charge, everyone benefits."

This is specious logic. If the eatery owners and associations lack a fair wage policy for their employees, they have no right to pass the burden on to their customers. It is here that the government should have intervened, urging the establishments to pay reasonable wages to their employees in accord with the standard practice in other industries.

Instead, the government just made it discretionary. Hem Pande, the secretary, claimed that this move will somehow "embolden" customers though it is unclear how as hotels can easily contest the customers' decision. Is the ministry planning to press into service a babu who will sit at every table in each restaurant and put forward an independent review of the kebabs, biryanis and desserts?


Updated Date: Jan 03, 2017 14:14 PM

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