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In a relief for the hospitality industry, the Delhi High Court has stayed the guidelines issued by the Central Consumer Protection Authority barring hotels and restaurants from including service charge by default in the bill.
Stating that the matter requires consideration, the court said that till the next date of the hearing the para 7 in the impugned guidelines issued on July 4 will remain stayed. The stay is subject to restaurants prominently displaying in their premises and menus that service charge will be levied in addition to food prices and taxes. In addition, no service charge will be levied by restaurants on takeaway orders.
The National Restaurant Association of India, which is one of the petitioners, said in a statement, the stay brings huge relief to millions of anxious restaurant workers as service charge constitutes a significant part of their earnings., it said.
The industry body said that it has always been steadfast in its assertion that there is nothing illegal in levying of service charge and it is a very transparent system. “As a responsible Restaurant Body, NRAI will soon send out advisories to all its members about the conditions spelled out by the Delhi High Court and will urge all Members to comply with them in totality,” it added.
The CCPA had released the guidelines earlier this month to prevent what it called an unfair trade practice and to protect consumer interests. The guidelines stated that service charge cannot be levied automatically and had also said that it cannot be collected by adding it to the food bill and levying GST on the total amount.
‘Prerogative of businesses’
In its writ petition, Federation of Hotel & Restaurant Associations of India (FHRAI) argued that it is entirely the prerogative of a hotel or a restaurant to decide on the structure of the menu and its pricing, to best suit the business model. It also stated that hotels are bound by wages contract with employees which specify benefits of service charges.
Gurbaxish Singh Kohli, Vice President, FHRAI added,”The guidelines are against the very grain of practising business in a fair environment and erroneously proceeded on the basis that Service Charge is akin to a tip /gratuity and therefore optional. FHRAI and its members shall make all endeavour to ensure that consumers and patrons are well informed about the levy of Service Charge. We are glad that our employees shall continue to avail agreed benefits under service Charge.”
The next hearing is scheduled for November 25.
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