Service Charge Imposed by Restaurants
October 21, 2022
Service Charge can be defined as the fee collected by the service provider for the services and facilities that are being provided by them. Service charge is usually charged in the tertiary sector of the economy such as in restaurants, tourism, banking, etc.
Take on Service Charge:
As per the ‘Guidelines to prevent unfair trade practices and protection of consumer interest with regard to levy of service charge in hotels and restaurants’ (“Guidelines”) issues by the Central Consumer protection Authority in 2022 stated that a component of service is inherent in provision of food and beverages ordered by a consumer. The charge without express consent of the consumer would amount to unfair trade practice under the Consumer Protection Act, 2019.
The Guidelines provided that a tip paid by the consumer towards hospitality received by him, is a separate transaction entered into at the customer’s discretion between the consumer and the staff. The decision of paying a tip is after the consumer has had his meal and is at a position to assess the quality of the service provided to him, hence, there is no implied consent of the consumer to pay for the service when he enters the restaurant. Therefore, the Guidelines stated that the service charge is voluntary in nature.
Latest Position:
The Guideline settles the issue on service charge stating that no hotel/restaurant shall add service charge automatically or by default in the bill and shall not impose service charge on the consumer under any other name as well. Further, the Guideline states that the hotels/restaurants shall inform that the charge is voluntary in nature.
The Guideline states that no restriction on entry or provision of services based on collection of service charge shall be imposed on consumers.
Hence, by the clarification on the position of the service charge the bargaining power of the consumers has been restored back.