THE SERVICE FEES MUST BE AT THE CHOICE OF THE CONSUMER: MINISTRY OF CONSUMPTION
The Department of Consumer Affairs on Thursday called on hotel and restaurant associations to stop levying mandatory service charges on their bills, calling them illegal. A day later, Food and Consumer Affairs Minister Piyush Goyal claimed that restaurants cannot add service charges to food bills, although customers can tip at their discretion, while that restaurants can raise prices to give raises to their staff.
“It has to be the consumer’s choice. You (restaurants) can’t put a service charge on a bill… If you feel that additional benefits should be given to employees, it can’t be imposed on customers. You can raise prices to give rises… There are no price controls in restaurants. We have not stopped restaurants from raising prices. Restaurants will be wrong to say that they will suffer losses if service charges are waived,” the minister said.
Consumer Secretary Rohit Kumar Singh also said the government would soon come up with a legal framework to prevent restaurants from collecting service charges, adding that the government issued guidelines in 2017, which “are generally not legally binding.” applicable”.
Service fees were made voluntary in 2017
Accusation not illegal or unjust: NRAI
Meanwhile, the NRAI on Friday refuted reports that the government had branded the service charge illegal, calling it “bogus”. “The department has heard the views of all stakeholders (in a meeting held on Thursday) and will consider all input before making a decision on the matter. Until final disposition, the service fee is still completely legal,” he said in a statement.
NRAI Chairman Kabir Suri adds, “On behalf of the entire restaurant industry, we have firmly reiterated all facts with proof to the Department that levying service charges is neither illegal, nor an unfair business practice as alleged, and this debate in the public domain is creating unnecessary confusion and disruption to the smooth operation of restaurants.Service fees are transparent, worker-friendly and are also recognized by numerous court orders which were shared with the department. In addition, the government also derives revenue from the service charge as the tax is paid by the restaurants for the same price.”
The accusation is neither illegal nor unjust, according to the NRAI
Service fees were made voluntary in 2017
Rohit Kumar Singh had written to the National Restaurant Association of India (NRAI) and cited the directive issued by the ministry in 2017. He said forcing consumers to pay a service charge as a condition of placing an order is tantamount to to a “restrictive business practice”. under the Consumer Protection Act. In 2017, the government said: “As per the approved guidelines on service charges, service charges are completely voluntary and non-mandatory now. Hotels and restaurants should not decide on the amount of service charges to be paid by the client and it should be left to the discretion of the client.”
“We are targeted to be transparent with our customers”
Most restaurateurs maintain that they clearly display the fact that they charge a service charge. Amrish Arora, who owns restaurants all over Maharashtra, says, “You cannot compare a quick service system with a restaurant, where there is a waiter who makes sure you are well taken care of. We are a service industry, we are not factories making products. A real person provides a real experience. The words that are used for service charges are “illegal”, “clandestine”, “deception”, but we are completely transparent about this. Indians are not used to tipping culture. They think the staff are servants. We also have people who want to tip but don’t know how much they should tip.
Pranav Rungta, NRAI Mumbai Chapter Chief, asks, “How can service charges be illegal if they say ‘we will create a legal framework’? If there is no legal framework, why is it illegal? The two statements are contradictory. During the discussion, a point was raised that the service charge can be called something else. However, at the end of the day, the customer is going to pay for it. So why not be transparent so customers and staff know what the service charge is? In fact, many customers don’t tip because it’s covered by the service charge. We are not the only industry to charge for the service. Movie ticket booking portals charge convenience fees, delivery apps have delivery fees. When a legal framework is created, the ramifications will be felt across all industries. If the law says we can’t charge it, we won’t charge it. But until then, it’s not illegal.
Another restaurateur says, “If I price my butter chicken at 500 in Gurgaon, 400 in Noida and 600 in Delhi, the customer can’t object. This is what we are told, that we can increase the price of the dishes. It’s as if we were targeted to be transparent.
Most restaurateurs maintain that they clearly display the fact that they charge service tax
“The service charge goes to the staff”
One of the main questions raised when discussing restaurants with the Department of Consumer Affairs was “Why don’t restaurants include service charges in the price of dishes?” About that, Amrish says, “We’re not doing it because it won’t be available to the staff. Only the servers keep their tips, but the amount of the service charge is shared by all the staff, from the cleaners to the servers. Also, if we just raise the prices, that revenue will also have to be shared with the owners, which means the staff share will be reduced.
Vishal Anand, Head of NRAI Gurgaon Chapter, adds, “Even though the road conditions are not good, the government is making payment of toll tax compulsory. There is no option not to pay the toll, it is mandatory. On the other hand, service fees are not mandatory, and we waive them even when customers do not want to pay them. We display it on our boards – we charge a service charge and government taxes are applicable. Taxes and VAT will change by state. In Noida the VAT charge is 10%, Gurgaon 18.9% and Delhi 25%. Why doesn’t any customer object to this? Taxes vary from a five-star restaurant to a regular restaurant. GST varies from 5% in restaurants to 18% in hotels. Customers have no idea of these taxes; it is at the discretion of the state. In a survey, 74% of people said they wanted to pay a service fee. So why are we singled out every time? We are penalized for being compliant, paying taxes and we don’t even get GST credits on inputs. Why penalize someone who offers staff benefits? »
We should have the choice not to pay a service charge: Diners
“I went to a five star restaurant for my birthday lunch with my family. The service charge was around 2000 and even though I wanted to ask them to waive it I didn’t because I didn’t want to. no argument with hotel staff. I once asked a restaurant to waive the service charge and the manager looked at me like I didn’t belong there. Since then I haven’t asked the same question to any restaurant or hotel. However, I think customers should have a choice,” shares Saket resident Jatin Sardana.
Suhani Chhabra, a resident of Subhash Nagar, adds: “Most restaurants tell you very clearly that they charge for it. And once you’re in a restaurant, you don’t really leave because of the service charge.
On the other hand, Roohi Singh, a resident of Dwarka, Sector 10, shares that she has not paid any service charge since 2017. “Why should I do this when I have the option of not paying ? Recently I went to a restaurant and when I asked them to waive my service charge, they asked me if there was anything I didn’t like about the service. I told them there was nothing wrong, but I don’t want to pay. It’s an extra,” says Roohi.