'Service Charge Is Very Much Legal': NRAI Amid Govt Review Of New Framework For Restaurants

NRAI clarified in a tweet saying, “department heard views of all stakeholders and will review all inputs before deciding on the matter. Untill final disposal, service charge is still very much legal."

People enjoying food at a Restaurant

Source : ANI

New Delhi: A day after the department of consumer affairs announced it will soon have a legal framework to stop restaurants from levying service charge on customers, the National Restaurant Association of India (NRAI) on Friday issued a clarification insisting that service charges levied by the restaurants are very much legal. In a tweet on Thursday, the restaurant associations dismissed the media reports regarding decisions allegedly taken at the department of consumer affairs as untrue.

NRAI issues clarification on #ServiceCharge Issue.#DontGrudgeIt #ServiceChargeIsLegal #Restaurants #Restaurantindustry pic.twitter.com/hYy3Ar2nO4

— NRAI (@NRAI_India) June 2, 2022

The association further said, “department heard views of all stakeholders and will review all inputs before deciding on the matter. Untill final disposal, service charge is still very much legal.”

According to the news agency PTI report, consumer affairs secretary Rohit Kumar Singh on Thursday said, “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", Singh added

“The framework will be legally binding on the restaurants to stop the practice,” he said according to the news agency PTI report, Singh added 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, according to the news agency report.

Major issues raised by the consumers on the National Consumer Helpline of DoCA relating to service charge were discussed. Additionally, guidelines on fair trade practices related to the charging of service were also referred to.

The restaurant associations observed that when service charge is mentioned on the menu, it involves an implied consent of the consumer to pay the charge. Service charge is used by restaurants/hotels to pay the staff and workers and is not charged for the experience or food served to consumer.

Consumer Organizations observed that levying service charge is patently arbitrary and constitutes an unfair as well as restrictive trade practice under the Consumer Protection Act. Questioning the legitimacy of such charge, it was highlighted that since there is no bar on restaurants/hotels on fixing their food prices, including an additional charge in the name of service charge is detrimental to the rights of consumers.