Goodbye service charge? Restaurants respond after govt says charges are voluntary

While some have welcomed it, fine dining restaurants are unsure about the notification.
Goodbye service charge? Restaurants respond after govt says charges are voluntary
Goodbye service charge? Restaurants respond after govt says charges are voluntary
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The Ministry of Consumer Affairs, Food & Public Distribution released a notification on Monday stating that "service charges are discretionary or voluntary". The news has been welcomed by many consumers who can now choose not to pay the service charge. However, some fine dining restaurants are unsure about the notification.

“We charge 10% service charge. For the time being, we will continue this unless the company decides on this matter. For the past few months, many customers have raised objections against the service charge but it is not in our hands,” said the Manager of Mainland China in Begumpet, Hyderabad.

The Ministry of Consumer Affairs said on Monday that it has received several complaints from consumers who claimed that many hotels and restaurants charged "service charge in the range of 5-20 per cent, in lieu of tips" and that consumers were "forced to pay irrespective of the kind of service provided".

“We don’t say that it is levied by the restaurant and not by the government. In that case no one will pay the service charge,” the Manager of Mainland China admitted.

Meanwhile, the General Secretary of the FHRAI (Federation of Hotel & Restaurant Associations of India) has said, “It is a standard policy and the customers should pay the service charge if they like the service and not pay if they do not like the service. But they should not be just allowed to walk out of the restaurant.”

According to a note issued to all the members of the FHRAI on its website on December 5, “Service charge, colloquially known as “tip”, is the amount paid to the staff of the restaurant or other similar establishment. In some instances, the establishment may choose to include this amount in the bill itself, and the percentage may vary from 5% to 15% of the value billed. This is a common and accepted practice in India as well as several other countries.”

However, N Ravi, President of Chennai Hotels Association, denied accepting any kind of service charges in restaurants.

“Service charge is only charged in fine dining and five star restaurants. We only charge service tax and 2 per cent VAT. But we do accept tips from the customer but that is only if the customer likes the services. Both tip and service charge are different,” he said.

Vijay Gopal, a Hyderabad-based social activist, had in October filed a case against a restaurant in Hyderabad for charging service charge.

“The Ohri’s restaurant charges 10% service charge at all its restaurant chains, looting citizens. The restaurant has also gone to the extent of mentioning it in the menu that all the prices are inclusive of taxes while the service charge is in no way a tax. It is an element that is up to the discretion of the customers to pay, not for the restaurants to impose on the customers,” he said.

The management of the restaurant has been booked under section 420 and 418 of the Indian Penal Code for dishonestly or wrongfully inducing delivery of property.

“Ä consumer has the right to decide whether they like the service or not. Pushing and forcing people to pay the service charge is a violation of fundamental rights. It's like they are making the customers pay even if they don’t like the service,” Vijay Gopal noted.

The restaurant manager of Ohri's said that starting from Tuesday, the restaurant will not be adding any service charge.

The Secretary of Telangana State Hotels Association said that they support the new notification.

“More than 50% of the restaurants in Hyderabad do not charge service charge. We support the move as customers should have the right to decide whether they want to pay for the service or not. The restaurants which are partners with our association do not charge service charge to their customers,” said Jadgdish Rao, Secretary of TSHA.

The Kerala Hotel and Restaurant Association has also expressed its view about the notification.

"Our Association is not against this order. Because service charge is something that customer should give if he is interested or pleased. We cannot compulsorily charge it. Most of the restaurants or hotels in Kerala do not have this system of taking service charge along with the bill. Some star hotels might be doing it. Some customers of five star or four star hotels ask for the service charge to be added along with bill. It is all customer's choice. However this new order is not relevant in Kerala as most of the hotels here don't do that," said G Jaypal, General Secretary of KHRA, told TNM.

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