Service charge

Collecting service fees is not illegal, a matter of individual policy: NRAI

The National Restaurant Association of India (NRAI) said on Tuesday that levying service charges was not illegal and was a matter of individual policy. The statement comes in response to the government’s decision to convene a meeting with the industry body on June 2, as it believes the charge is mandatory for consumers.

“Information regarding the amount of service charge is mentioned/displayed by restaurants on their menu cards and also displayed at the premises so that customers are well aware of such charge before availing the services,” the NRAI said in a statement.

He said that once the customer is informed of these charges in advance and then decides to place the order, it becomes an agreement between the parties and is not an unfair trade practice. In addition, Goods and Services Tax is paid on the service charge.

The industry body said it provided its response to the government when this issue was raised in 2016-17. “There is nothing new that was communicated by the Consumer Affairs Department in its letter for the June 2, 2022 meeting,” he said.

In a written communication to the NRAI recently, Secretary of the Department of Consumer Affairs Rohit Kumar Singh said that restaurants and eateries collect service charges from consumers by default, although the collection of such charges is voluntary and at the consumer’s discretion and not mandatory by law. Consumers are forced to pay service charges, often set at arbitrarily high rates by restaurants, he said.

“Given that this issue affects consumers as a whole on a daily basis and has significant consumer rights ramifications, the department has found it necessary to examine it more closely and in detail,” the communication said.

During the meeting, issues such as restaurants making service charges mandatory, adding service charges to the bill under the guise of other fees or charges, not disclosing to consumers that payment of service charges is optional and voluntary, and embarrassing them if they resist paying the service charge, would be discussed.

According to official guidelines issued in April 2017, a customer’s entry into a restaurant cannot by itself be construed as consent to pay a service charge. The guidelines further state that a customer placing an order amounts to their agreement to pay the prices displayed on the menu card plus applicable taxes, and charging any extra without the customer’s express consent would amount to an unfair trade practice. .