Service charge

Have the right to levy a service charge: Restaurant organization

NEW DELHI: Defending the right of restaurants to levy service charges as legal and optional, the Federation of Hotel and Restaurant Associations of India said on Friday it would participate in discussions on the matter convened by the Ministry of Consumption (DoCA) in June 2.

The DoCA discussion follows customer complaints on the National Consumer Helpline that restaurants are imposing a mandatory 5-15% levy even though the service charge is different from the tax and is in the nature of a tip collected by the restaurant.
In response to the complaints, Union Secretary for Consumer Affairs, Food and Public Distribution, Rohit Kumar Singh, had written to restaurant associations and said the default billing option was not imposed by law.
Reacting to the charge, FHRAI said on Friday that the service charge is “part of the invitation offered by the restaurant to potential customers. It is up to the customers to decide whether they wish to frequent the said restaurant or not.
“The service charge is considered a beneficial payment since it is intended for the benefit of the staff of the establishment…It is at the sole discretion of the restaurant whether or not to charge a service charge. If a customer objects to paying the service charge, it can be removed from the bill,” said Gurbaxish Singh Kohli, Vice President of FHRAI.
FHRAI also said the service charge, colloquially referred to as “tipping,” is prominently displayed on restaurant menus and customers are aware of the fees charged.
A recent TOI survey, however, showed that many customers were unaware that paying the service fee is voluntary. The majority of customers were also never told by the restaurant that paying the fee was optional.