Hotels, restaurants barred from levying service charge by default or automatically: Central Consumer Protection Authority

BL New Delhi Bureau | | Updated on: Jul 05, 2022
The guidelines come after the Consumer Affairs Ministry received several service charge-related complaints through the National Consumer Helpline

The guidelines come after the Consumer Affairs Ministry received several service charge-related complaints through the National Consumer Helpline | Photo Credit: ASHOK R

Guidelines state that service charge cannot be collected by adding it to the food bill and levying GST on the total amount

Hotels and restaurants will can no longer levy service charge automatically or by default and they will need to inform consumers that service charge is voluntary, optional and at consumers’ discretion, according to the Central Consumer Protection Authority.

The Authority issued the guidelines on Monday which said hotels and restaurants cannot collect service charge under any other name, levy charge by default in the food bills. Stating that hotels and restaurants cannot force consumers to pay service charge, the guidelines added . Most importantly, the guidelines state that “service charge shall not be collected by adding it along with the food bill and levying GST on the total amount.”

The guidelines come after the Consumer Affairs Ministry received several service charge-related complaints through the National Consumer Helpline including instances of restaurants making service charge compulsory and adding it in the bill by default and suppressing the fact that paying such a charge is optional and voluntary among others. The Ministry had also held a meeting with industry bodies on the issue last month.

In its guidelines, the CCPA stated that the component of service “is inherent” in price of food and beverages offered by restaurants and hotels and this pricing covers both the goods and services components. It also said that charging anything other than the amount of the food items displayed in the menu along with the applicable taxes, would “amount to be unfair trade practice.” It added that there is no restriction on hotels and restaurants to set the price at which they want to offer food and beverages to consumers. It also pointed out that service charge is being levied in addition to the total price of the food items mentioned in the menu and applicable taxes, often in the guise of some other fee or charge.

Stating that the decision to pay a tip or gratuity by a consumer does not arise merely by entering a restaurant and placing an order and therefore service charge cannot be added “involuntarily” and needs to be left to consumer’s discretion.

“Various cases relating to levying of service charge have also been decided by consumer commissions in favor of consumers, holding the same as an unfair trade practice and in violation of consumer rights,” it said.

“If any consumer finds that a hotel or restaurant is levying service charge in violation to the guidelines, a consumer may make a request to the concerned hotel or restaurant to remove service charge from the bill amount. Also, the consumer may lodge a complaint on the National Consumer Helpline (NCH),” the CCPA said in a statement.

Published on July 04, 2022
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