Service charge

Service charge: Delhi HC maintains guidelines prohibiting restaurants from charging service charge

Giving relief to the hospitality industry, the Delhi High Court has suspended Central Consumer Protection Authority (CCPA) guidelines issued on July 4 that banned restaurants and hotels from levying service charges on bills food.

The court noted that the matter needed to be reviewed and that until the next listing date, the CCAC guidelines would remain suspended. The stay is subject to the restaurateurs who ensure that the levy of service charges in addition to the price and taxes and the customer’s obligation to pay them are prominently displayed on the menu or other places. No service charge can be levied on take-out orders. The next court date is scheduled for November 25.

CCPA guidelines released on July 4 stated that no hotel or restaurant should add service charges automatically or by default to the bill and that service charges should not be collected from consumers under any other name.

The high court on Wednesday heard petitions filed by the National Restaurant Association of India (NRAI) and the Federation of Hotel & Restaurant Associations of India (FHRAI).

The NRAI said the Delhi High Court’s order granting a stay of the CCPA guidelines will bring relief to “millions of anxious restaurant workers”.

“The NRAI is very relieved by the adoption of this order, as it has also had a direct negative impact on the human capital employed in the trade. The NRAI has always been firm in its assertion that there is nothing illegal about charging service fees and that it is a very transparent system. We are very pleased that the Honorable High Court of Delhi has upheld this view,” the NRAI said in a statement. “NRAI will soon send notices to all its members of the terms set out by the Honorable High Court and urge all members to comply with them in full,” the industry body added.

In its motion in brief, the FHRAI had argued that the CCPA guidelines interfered with the right of restaurants to conduct their business as they saw fit and that the CCPA could not make rules and regulations under the guise of guidelines and seek to enforce them. through instructions to district collectors. “Void the said guidelines, the CCPA is attempting to usurp the legislative power of parliament, the judiciary and to expand the definition of unfair trading practices and restrictive business practices. It is argued that the said guidelines were formulated in a manner that exceeds the jurisdiction and scope of the CCPA’s authority and are therefore subject to reversal on that basis alone,” FHRAI said in its motion.

Pradeep Shetty, FHRAI’s honorary co-secretary, said the association would now urge its members to more prominently display the collection of service fees. “We weren’t charging a service charge on takeout orders anyway. We had raised our objections on many constitutional grounds, the most fundamental of which was the right to do business. By means of these guidelines, you cannot restrict our right to do business in the way we wish. This must be done through legislation. We also have the right to structure our prices in any way we wish. Given the nature and complexity of the business, our right to treat our employees differently and incentivize them through service charges cannot be taken away in this way either,” he said. added.

The CCPA guidelines released on July 4 also stated that no hotel or restaurant should force a consumer to pay a service charge and should clearly inform the consumer that the service charge is voluntary, optional and at the discretion of the consumer. of the consumer. No restrictions on entry or provision of services based on charging service fees will be imposed on consumers. The service charge should not be collected by adding it to the food bill and deducting GST from the total amount, as instructed. They also mentioned that if consumers find that a hotel or restaurant is charging a service charge in breach of the guidelines, they can lodge a complaint with the National Consumer Helpline (NCH) by calling 1915 or via the mobile app. NCH. Consumers may also file a complaint against unfair marketing practices with the Consumer Affairs Commission or file a complaint with the relevant District Collector for investigation and further processing by the CCPA.

Zorawar Kalra, MD, Massive Restaurants, said the order was a huge relief for thousands of employees who work in the sector, as the restaurant industry is the second largest employer of human capital and service charges were in all cases for their “improvement”.