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‘No illegality’ in levying service charge by restaurants: NRAI

BL New Delhi Bureau | | Updated on: May 24, 2022
Once the customer is made aware of service charges in advance and then decides to place the order, it becomes an agreement between the parties, says NRAI

Once the customer is made aware of service charges in advance and then decides to place the order, it becomes an agreement between the parties, says NRAI | Photo Credit: SHIV KUMAR PUSHPAKAR

The restaurant industry body said that information regarding the service charge is displayed by restaurants on their menu cards and the premises so that customers are aware

The National Restaurant Association of India on Tuesday said that there is “no illegality” in levying the service charge. The restaurant industry body’s statement comes after the Department of Consumer Affairs cautioned restaurants on levying service charge “by default” on consumers after receiving complaints.

“The levy of a service charge by a restaurant is a matter of individual policy to decide if it is to be charged or not. There is no illegality in levying such a charge,” it said. The restaurant industry body said that information regarding the amount of service charge is mentioned and displayed by restaurants on their menu cards and the premises so that customers are aware regarding the levy of service charge before availing the services.

“Once the customer is made aware of such a charge in advance and then decides to place the order, it becomes an agreement between the parties and is not an unfair trade practice. GST is also paid on the said charge to the government,” the restaurant industry body added.

NRAI said that it had provided its response on this issue even in 2016-17.

The Department of Consumer Affairs has called NRAI for a meeting on June 2. In its letter sent to industry body, the Ministry has raised issues regarding restaurants charging service charges compulsorily, adding service charges to the bill in the guise of some other fee or charge, and supressing from consumers that paying service charges is optional and voluntary. “Since this issue impacts consumers at large on a daily basis and has significant ramifications for the rights of consumers, the department construed it necessary to examine it with closer scrutiny and detail”, it added.

‘Restrictive trade practice’

In 2017, the Ministry issued guidelines that state that the entry of a customer into a restaurant cannot be itself construed to pay a service charge. “Any restriction on entry on the consumer by way of forcing her/him to pay a service charge as a condition percent to placing an order amounts to ’restrictive trade practice’ under the Consumer Protection Act,” it added.

Published on May 24, 2022
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