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By Alok Gupta, Managing Director, Himland Trade Monitors Private Limited
Of late, I have been observing that almost all the restaurants in India are levying in their bills a service charge which ranges from 5% to a whopping 20%. Earlier, I used to pay the bill as it is, but now, after a bit of study, I observe that this charge is nothing less than a ‘social extortion’. Read further for the reasons why.
First and foremost, it is not a mandatory charge required to be paid by the diners, it is a voluntary payment as ‘tips’ we generally pay to the serving staff after their pleasant service.And tips, as we all know, are paid as per the whims and fancies of the payer, not as a percentage of any bill. Ministry of Commerce has clarified time and again, amply well, thatservice charge is voluntary, optional and payable only at thecustomers’ discretion.
CCPA ( Central Consumer Protection Authority ) under section 18(2)(1) of the Consumer Protection Act, 2019 has clearly issued the following guidelines …
(i) No hotel or restaurant shall add service charge automatically or by default in the bill. (ii) Service charge shall not be collected from consumers by any other name. (iii) No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer’s discretion. (iv) No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers. (v) Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount.
It may be noted that the price of service is included in the price of food and beverages served by an outlet and there is no restriction on an establishment to set its own prices so, charging for services over and above the bill is unethical and amounts to an unfair trade practice.
The cost of a chapati which we eat at home wouldn’t be more than a rupee or two rupees while the same chapati is charged more than INR 20/-, sometimes even up to INR 40/-, but in any case, upwards of INR 10/-. Why then there is this greed of charging for service over and above the menu rates? And, ironically, a chapati served for INR 40/- would attract more service charge for the outlet than the chapati served for INR 10/- !!
It is understood that a tip or gratuity is paid only towards hospitality received beyond the basic minimum service at the consumer’s discretion. Hence, it is only after completing the meal, a consumer is in a position to assess the quality and service and decide whether or not to pay tip or gratuity and if so, how much. The decision to pay some tip or gratuity by a consumer does not arise merely by entering the restaurant or placing an order. Therefore, a service charge cannot be added to the bill without the specific consent of the diner. So, an outlet should ask its guests and patrons before levying this charge rather than charging automatically and placing the consumers in a dilemma and awkward position for asking the same to be removed from the bill. Some restaurants do mention in their menu that they levy service charge but do not mention how much. So, every restaurant should be asked to mention the percentage of service charge they collect, in fact,the same should also be mentioned everywhere along with the name and logo of the outlet. The same should also be mentioned in their advertisements.
All these outlets take advantage of the situation where they know that if you are coming with some business guests, you would hesitate to ask for the removal of such charges, not only will the diners not ask to remove the service charge but also may they pay some tip over and above the service charge and since the law enforcement in India is very slow, gueststend to not lodge any complaint against such cases.
Since the amount collected through the service charge is for distribution to the staff, the diners also have the right to know as to how much amount was collected the previous day, how much was distributed and in which fashion and how much is left undistributed. The outlets desirous of levying service charge should also mention the details of the salaries paid by them to their staff. If there remains any undistributed amount for any reason for more than a week, the same should be refunded to the diners or be deposited to the government exchequer the way it is done by the companies in the case of undistributed dividends.
It is the time of online apps and home deliveries. Almost all the apps provide free home delivery, and this is their USP. If we see logically, these delivery boys who come to your home in sun, rain and all sorts of weather conditions are more deserving than the ones who serve you in an air-conditioned environment. If this Service Charge issue is not nipped in the bud, tomorrow these apps will also start collecting these charges in some or the other way.
Last but not least, in the most likely situation, the outlet, on asking by the dinner, will remove the service but, if any outlet refuses to remove such charges, a complaint can be lodged against it. There have been cases where these outlets have been asked to refund not only the service charge so collected but also a penalty on the same. In the case of Cream Centre versus Mr. Yogesh Patki, the district consumer commissioner ordered to pay a penalty of INR 25,000/- on a service charge of INR 29/- collected by the restaurant.
Jaago Graahak Jaago
About the author
Professionally, he is an exporter, an educationist and an estate advisor. He is the President of the prestigious The Estate Agents Association of India, Central Zone One. He is well a published author who writes on various social issues after studying and anaylsing a situation seen through a common man’s eyes. He can be reached at alok@himland.in. Views expressed are personal.
