Service charge

Some pubs continue to charge service fees despite the new rule

The ordinance prohibiting restaurants from levying a service charge with the bill makes no difference in some pubs and restaurants in Bengaluru.

Leading pubs in Bengaluru continue to levy up to 10% ‘service charge’ – the term they use for tipping.

The Central Consumer Protection Authority, a Delhi-based government body, has issued guidelines prohibiting restaurants from charging default service charges from July 4.

Some restaurants cite these same guidelines to say they can continue to collect tips with the bill after notifying customers.

“According to the guidelines, we may levy a service charge, but customers must be informed beforehand. We have a sign right at the entrance about the service charge and it’s also mentioned on every menu page,” says Mukesh Tolani, co-owner of Toit microbrewery in Indiranagar. If customers don’t want to pay the charges, “it will be removed right away,” he says.

The Central Consumer Protection Authority, set up under the Consumer Protection Act 2019, considers the default collection of service charges an unfair commercial practice (see box).

Social, a pub with five branches in the city, also continues to collect service charges. “We first check with customers if they want to pay. If they want it, we add it to the bill,” says Ranveer Sabhani, business manager in the south, Impresario, the company that runs the pub.

Bannerghatta Road-based Gatsby Cocktails and Cuisine, which opened earlier this year, is testing the waters for a month before deciding what to do next. “Until we get better clarity, we thought it would be best to remove the load altogether. Customers are increasingly complaining about fees,” said Nikil Sharma, Managing Director. Metrolife.

A lawyer says the guidelines do not make it illegal to charge service fees. “It’s about getting consent from customers,” he explains. If a restaurant adds the service without the customer’s consent, the customer can file a complaint with the consumer commission.

The prices were raised

To compensate for the loss of service charges, many restaurants and pubs are planning to increase their menu
prices.

“Now there is a negative connotation attached to the whole concept of service charges. So we decided to walk away from it. This will inevitably lead to an increase in our prices,” says Chetan Hegde, owner of 1522, a chain of pubs.

Raising menu prices will help restaurant staff make ends meet, Chetan says.

“Menu prices will be increased by 10% in some of my outlets where the service charge was not already included. This will then be pooled and distributed among staff based on the point system,” explains he.

“Easy to file a complaint”

“If customers find a restaurant that does not follow the guidelines, they can easily file a complaint with the consumer commission,” explains
YG Muralidhar, consumer rights activist.

He thinks Bangalore lacks a strong consumer advocacy group. “Other cities have large groups that help consumers. We need it in Bengaluru,” he adds.

If you find a restaurant that violates the guidelines, you can:

Call the National Consumer Helpline (call 1915). Get closer to a consumer commission. The complaint can be filed electronically through the e-daakhil portal.

What causes legal quibbles

Delhi’s Central Consumer Protection Authority on July 4 issued a series of guidelines clearly prohibiting the addition of service charges in the food bill:

A component of service is inherent in the price(s) of food and beverages offered by the restaurant or hotel. The price of the product therefore covers both the goods and services component… To charge anything other than the said amount would amount to an unfair commercial practice under the law (on consumer protection).

Some pubs and restaurants cite the following lines, appearing later in the same Central Consumer Authority document, to claim that they can add the service charge to the bill provided they tell customers about it. ‘advance :

No hotel or restaurant should add a service charge automatically or by default to the bill.

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.