To pay or not to pay service charge at restaurants? Centre terms it ‘illegal’, hospitality body calls it ‘tip’

The Ministry of Consumer Affairs, on Thursday, said that levying service charges is illegal.

New Delhi: The Central government on Thursday has directed restaurants not to levy service charges on the bills. In a notification, the Ministry of Consumer Affairs said that levying service charges is illegal, adding that it will take steps to soon come up with a legal framework. The ministry will also take steps to prevent restaurants from levying service charge on bills in a bid to protect consumer interests. 

In response to the complaints by the customers, the Department of Consumer Affairs (DoCA) had set up a meeting today (June 2) with the hospitality industry association Federation of Hotel & Restaurant Associations of India (FHRAI) to discouss the issue of service charge on restaurant bills.

Meanwhile, FHRAI has clarified that a restaurant collecting service charge is neither illegal nor is in violation of the law. "The Association explained that a service charge, like any other charge collected by an establishment, is part of the invitation offered by the restaurant to potential customers. It is for customers to decide whether they wish to patronise the restaurant or not," the apex body said. 

Last month, the Ministry of Consumer Affairs, Food & Public Distribution said that payment of ‘service charge’ is a voluntary act depending on the discretion of consumers and restaurants cannot force consumers to pay it. 

Rohit Kumar Singh, Secretary, Department of Consumer Affairs, had said in a leter to President, National Restaurant Association of India (NRAI) that it has been pointed out that the restaurants and eateries are collecting service charge from consumers by default, even though collection of any such charge is Voluntary and at the discretion of consumers and not mandatory as per law.

“It has been pointed out in the letter that the consumers are forced to pay service charge, often fixed at arbitrarily high rates by restaurants. Consumers are also being falsely misled on the legality of such charges and harassed by restaurants on making a request to remove such charges from the bill amount. “Since this issue impacts consumers at large on a daily basis and has significant ramification on the rights of consumers, the department construed it necessary to examine it with closer scrutiny and detail”, the letter further added. Also Read: Tata-owned Air India introduces VRS scheme for thousands of employees

In a clarification last month, FHRAI had said that service charge is known colloquially as ’tip’, and is paid directly to restaurant staff or other employees at other similar establishments. Also Read: Social media rules are all set to change, Centre to set up grievance appellate committee