Legal Framework To Stop Restaurants From Levying Service Charge Soon: Govt

During the meeting, representatives of NRAI and FHRAI said that the levying of service charges was not illegal.

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New Delhi: The government will soon have a legal framework in a bid to check restaurants from levying service charge on customers, Consumer Affairs Secretary Rohit Kumar Singh said on Thursday. According to a report by news agency PTI, the decision was taken after a meeting with the representatives of associations of restaurants as well as consumers, after which the Department of Consumer Affairs has deemed the practice as “unfair”.    

"We will soon work on a legal framework because there were guidelines of 2017 which they have not enforced. The guidelines are not generally legally enforceable," PTI quoted Singh as saying.

The framework will be legally binding on the restaurants to stop the practice, he said, adding that the consumers usually get confused between service charge and service tax and end up paying.

The meeting was attended by representatives of the National Restaurant Association of India (NRAI), Federation of Hotel & Restaurant Associations of India (FHRAI) and consumer organisations, including Mumbai Grahak Panchayat and Pushpa Girimaji.

Notably, during the meeting, representatives of NRAI and FHRAI said that the levying of service charges was not illegal.

According to an official release, the major issues raised by the consumers, on the National Consumer Helpline were discussed during the meeting.

The issues were related to compulsory levying of service charge, adding the charge by default, without consent of consumer, suppressing that the charge is optional, and also embarrassing consumers if they refused to pay it.

The consumer organisations are of the view that levying the service charge is arbitrary and constitutes an unfair and restrictive trade practice under the Consumer Protection Act, as per the release.

They also added that since there is no bar on the restaurants and hotels on fixing their food prices, putting an additional charge in the name of service charge is detrimental to consumer rights, the release added.

Meanwhile, NRAI chief Kabir Suri said the levying service charge is "neither illegal, nor an unfair trade practice as alleged, and this debate in public domain is creating unnecessary confusion and disruption in smooth operations of restaurants."

"The service charge is transparent, worker friendly and is also recognised by many judicial orders which have been shared with the department. In addition, the government also earns revenue from the service charge as tax is paid by restaurants on the same," he added.

The FHRAI, too, said that a restaurant collecting service charge is neither illegal nor is in violation of law.

"... a service charge is meant for the benefit of the staff and so, some establishments make a conscious choice to adopt a policy beneficial towards its staff members. Levying service charge is a general practice adopted across the globe. It is neither illegal nor violating any law. Each establishment is free to create its own policy in this regard," FHRAI Vice-President Gurbaxish Singh Kohli, said.

Speaking on the transparency of service charge, FHRAI said that the charge is disclosed in advance and is clearly printed as a separate heading in the bill as "charge", and not a "tax".