Service charge

Hotels and restaurants cannot levy service charges by default, says CCPA



The Central Consumer Protection Authority (CCPA) on Monday banned hotels and restaurants from levying default service charges on food bills and allowed customers to file complaints if the standards were breached. There should be no collection of service fees under any other name, he added.

Hotels must clearly inform the consumer that payment of service charges is at the discretion of the consumer, the CCPA said.

The guidelines allow consumers to file complaints against the practice under various provisions of consumer protection law, calling it an “unfair commercial practice” and a violation of consumer rights.

“No restrictions on entry or provision of services based on levying service charges will be imposed on consumers,” he added.

“This is part of the guidelines, which means that legal action can be taken against the restaurant by the CCPA, because under the new consumer protection law, it is empowered to take action under parts relevant laws,” said Bijon Misra, a noted consumer. rights activist and founder of Consumer Online Foundation, who pioneered the “Jago Grahak Jago” campaign, told Business Standard.

Misra said what will happen now is that restaurants and hotels will start including the “service charge” in the price itself, which could inflate the bill.

The CCPA also said the service charge cannot be collected by adding it to the food bill and charging GST on the total amount.

If a consumer finds that a hotel or restaurant is charging a service charge in violation of the guidelines, he or she can ask the establishment concerned to remove it from the amount of the bill.

“The victory for the common man is that after that, if someone doesn’t want to pay a service fee, they can’t be forced to,” Misra said.

He said that as a positive consequence of the decision, waiters and others in hotels might be tempted to provide better service to the customer in the hope of a good “tip”.

The CCPA, in the guidelines, stated that a tip or gratuity relates to hospitality received beyond the basic minimum service contracted between the consumer and hotel management, and constitutes a separate transaction between the consumer and hotel/restaurant staff at the discretion of the consumer.

It is only after finishing the meal that a consumer may be able to assess the quality, as well as the service, and decide whether or not to tip, and if so, how much.

A consumer’s decision to tip does not stem from simply entering the restaurant or placing an order.

“Therefore, service charges cannot be added to the bill unintentionally, without giving consumers choice or discretion to decide whether they want to pay such charges or not,” the guidelines state.

Meanwhile, according to an official statement, an aggrieved consumer can lodge a complaint with the National Consumer Helpline (NCH), which operates as an alternative dispute resolution mechanism at the pre-litigation level, by calling 1915 or via the mobile app. NCH. They can also lodge complaints with the Consumer Commission.

According to an official statement, the decision to ban service charges altogether was taken after a number of complaints were registered with the National Consumer Helpline (NCH) by consumers regarding the collection of service charges.

Consumers have complained that restaurants are making the service charge mandatory and adding it to the bill by default, removing the fact that paying the service charge is optional and voluntary, and embarrassing consumers in case they resist paying the charge. on duty.

“Various cases relating to the collection of service fees have also been decided by consumer commissions in favor of consumers, considering them an unfair commercial practice and in violation of consumer rights,” the official statement said.