Service charge

Service Fees: Clarified all service fee concerns in meeting with DoCA: FHRAI

The Federation of Hotel and Restaurant Associations of India (FHRAI) said that during its meeting with the Department of Consumer Affairs (DoCA) held on Thursday, the association submitted its formal response to all concerns raised at the service charges collected by Restaurants.

The FHRAI said it is standing firm on the issue and clarified that a restaurant charging a service fee is neither illegal nor in violation of the law. The FHRAI said the service charge, like any other fee collected by an establishment, is part of the invitation offered by the restaurant to potential customers. It’s up to customers whether they want to patronize the restaurant or not.

According to the industry body, DoCA said they could gather a holistic view on the subject from different stakeholders and after analyzing all aspects, they could formulate a policy if necessary.

“The service charge is essentially a tip and it is up to the establishment to decide whether and how much to charge on the bill. A restaurant or hotel can just as easily absorb the service charge component into the fees they collect to the customer by simply including it in the menu prices,” said Gurbaxish Singh Kohli, Vice President of FHRAI.

“However, service charges are intended for the benefit of staff and therefore some establishments make a conscious choice to adopt a policy that benefits their staff members. The levying of service charges is a general practice adopted in the worldwide. This is not illegal or in violation of any law. Each institution is free to create its own policy in this regard,” he added.

Regarding concerns about the transparency of adding service charges to the bill, FHRAI said the charges are disclosed up front and are clearly printed under a separate heading in the bill. as a “fee”, not a “tax”.

“The information regarding the amount of the service charge is mentioned by the restaurants on their menu cards. Unlike many other service providers who charge customers under the guise of “convenience fee”, “airport fee” or “use fee”, restaurants act fairly and clearly state the amount paid and its objective. Since there is nothing hidden or misleading about the levy, it cannot be considered an unfair business practice,” said Pradeep Shetty, Honorary Joint Secretary of FHRAI.

“We have advised our members if they choose to charge a service charge, they should clearly state this on their menu itself. Since this is a socio-economic measure, the rationale for the including in the invoice as a separate charge is also to clearly disclose to customers that a specified portion of the amount they have paid is returned to the establishment’s staff,” he added.