Service charge

Restaurant lobbies rejoice as High Court suspends order banning service charge tax

The suspension by the Delhi High Court of an order prohibiting restaurants from charging service charges is a relief for hoteliers and restaurateurs.

The Single Judge Bench of the Delhi High Court in an interim order said that information that a certain restaurant charges a service charge should be prominently displayed for the knowledge of customers.

The court also recorded a statement from the lawyers of the National Restaurant Association of India that they would not levy this charge on takeout.

On July 4, the Department of Consumer Affairs issued guidelines stating that service charges should not be added automatically or by default to food bills. This prompted the NRAI and the Federation of Hotel and Restaurant Associations of India to file petitions challenging the Central Consumer Protection Authority’s standards.

The guidelines were “arbitrary, untenable and should be struck down” because they restricted hospitality establishments’ already stressed right to do business, the petitioners said. Restaurant lobbies have also demanded clarification on the legality of the CCPA guidelines.

The CCPA lawyer, however, told the Delhi High Court that consumers should not be forced to pay service charges. To this, the court said, “If you don’t want to pay, don’t enter the restaurant. It’s basically a matter of choice [for consumers].”

The next hearing is scheduled for November 25. Until then, the interim order will remain in place, essentially allowing restaurants to collect service fees.

“The order is a huge relief to millions of anxious restaurant workers as the CCPA guidelines have dealt them a severe blow, given that service charges form a significant part of their income,” the NRAI said in a statement. a statement.

According to the FHRAI, it is entirely the prerogative of a hotel or restaurant to decide on menu structure and pricing based on the business model.

The new guidelines were “against the very practice of doing business in a fair environment and proceeded erroneously on the basis that the service charge is akin to tipping/tipping and therefore optional”, the association said.

“We are pleased that our employees continue to receive the agreed benefits under the service fee,” said Gurbaxish Singh Kohli, Vice President of FHRAI.