Restaurateurs stick to the legality of service charge and will continue to levy it, while consumer forums insist the new guidelines hold the force of law
Earlier this week, the Central Consumer Protection Authority (CCPA) announced five major guidelines that say no restaurant or hotel shall add service charge by default or by rechristening it, neither can they force a customer to pay it or restrict services based on it
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Chances are that the next time you eat out you’ll end up with scrumptious food, but also dollops of confusion. Not over how you want your steak done, or how spicy your butter chicken should be, but over a set of guidelines that will most likely affect how much you should pay at the end of your meal.
Earlier this week, the Central Consumer Protection Authority (CCPA), which was set up by the Ministry of Consumer Affairs, Food and Distribution in July 2020, announced five major guidelines that say no restaurant or hotel shall add service charge by default or by rechristening it, neither can they force a customer to pay it or restrict services based on it. Last, it says, a service charge shall not be collected by adding it along with the food bill and levying a GST on it.
The guidelines come a month after the department of consumer affairs, on June 2, held a meeting with restaurant associations and consumer forums and promised to come up with a “robust framework” to strengthen another set of guidelines it had rolled out in 2017 to govern the subject of service charge. With its July announcement, the pot that had been simmering for a few years has started to roil.
The National Restaurant Association of India (NRAI), which represents over 500,000 restaurants in the country, has remained strident in its defence of the service charge, saying it isn’t anything illegal and its members will continue with it. “Our stance was very clear: If someone wasn't happy with the service, we’d anyway take it off the bill,” says Sagar Daryani, vice-president, NRAI, and CEO and co-founder of Wow! Momo. “The CCPA is creating confusion in the consumer’s mind because ultimately it’s only saying that you can ask the restaurants to take it off if you want. I read media reports saying service charge has been banned. Nothing has been banned,” he reiterates.
In its press release, NRAI mentions that the legality of levying a service charge has been upheld at various points by the Supreme Court and the high courts as well as bodies like the National Consumer Disputes Redressal Commission. It cites the 2001 order of the Monopolies and Restrictive Practices Commission in the SS Ahuja vs Pizza Express case in which it said: “Levy of service charges cannot be questioned in law…”