The NRAI said it is also relevant to state that additional fees are levied by many other industries, including some government agencies. However, the guidelines are only issued for the restaurant industry. The NRAI has stated that the service charge is part of the owner’s discretion/decision regarding the total price to be paid by a customer with respect to the sale or service of a product. It is one of the components of the total price of the product. “Neither the government nor any other authority can interfere with the business owner’s decision in this regard. It is a universally accepted business practice,” the industry body said in a statement.
NRAI further stated that the customer is informed of the price and its components before the customer places an order for the product. “Once the customer has placed the order after being informed of the terms and conditions, a binding contract comes into being. No authority can interfere with the binding nature of a valid contract until it is demonstrated and proven that ‘It is impermissible or against any unfair business practices,’ the NRAI said.
The industry body added that the legality, reasonableness or justification of levying service charges has been reviewed by the Supreme Court of India, High Courts, National Dispute Redress Commission of consumption, the former Monopolies and Restrictive Trade Practices Commission and by tax authorities. (ITAT). The levy of service charges has been upheld in various court rulings, he added.
The Central Consumer Protection Authority banned hotels and restaurants from levying service charges automatically or by default on bills through new guidelines on Monday.
The NRAI said the levying of service fees also has a socio-economic angle.
“Generally, tips are paid and pocketed by the staff who serve the customers (waiters/stewards) and nothing is shared with the house employees who contribute to the overall product/service. The service charge system is considering a one-time distribution even for in-house background staff whose contribution is so recognized and recognized as part of the service fee collected from the client, so it is at the discretion of the owner to run their business and policy to put in place,” the NRAI said.