In a bid to protect consumer interests, the Department of Consumer Affairs on Thursday said that it will bring about a “ robust framework” on the service charge levied by hotels and restaurants .

A meeting chaired by DoCA Secretary, Rohit Kumar Singh on Thursday was attended by key stakeholders, including National Restaurant Association of India and Federation of Hotel & Restaurant Associations of India (FHRAI). Consumer organisations were also invited to attend the meeting.

Key issues

The official statement said that the Ministry highlighted key issues raised by consumers on the National Consumer Helpline. The issues included “compulsory” levy of service charge by restaurants and hotels, addition of the service charge by default without the consumers consent and suppressing the fact that such a charge is “optional and voluntary”.

DoCA also reiterated the guidelines on fair trade practices related to charging of service charge by hotels and restaurants, that were issued in 2017, should be followed. The guidelines state that placing an order by a customer amounts to his/her agreement to pay prices in the menu along with applicable taxes. However, charging a sum above this amounts to “unfair trade practice” under the Consumer Protection Act.

“Since the levy of service charge adversely affects millions of consumers on a daily basis, the Department will soon come up with a robust framework to ensure strict compliance by the stakeholders,” the Ministry added.

‘Arbitrary, unfair’

Consumer organisations who attended the meeting called the levy of service charge as “arbitrary” and “unfair”

However, on their part, the industry bodies NRAI and FHRAI said that information regarding the amount of service charge is displayed on menu cards and at the premises. “Unlike many other service providers that charge customers under the guise of ‘Convenience Fee’ or ‘Airport Charges’ or ‘Usage Fee’, restaurants fairly and clearly mention the amount being charged and its purpose. Since there is nothing hidden or deceptive about the levy, it can’t be considered unfair trade practice,” said Pradeep Shetty, Jt. Hon. Sec, FHRAI.

“On behalf of the entire restaurant Industry, we have firmly reiterated all facts (in the meeting) with proof to DoCA that levy of 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 paid by restaurants on the same,” said Kabir Suri, President, NRAI.

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