Service charge issue: Govt’s new move may reduce your food bills; Restaurants body calls it ‘unfortunate’

Service charge issue: A national food industry body and several restaurant owners said the government’s move to come out with a legal framework to stop restaurants levying service charge is “unfortunate” and it will “hurt the interests” of ordinary staffers who render services to customers. National Restaurant Association of India (NRAI) president Kabir Suri also said there is no legal rule made on the issue yet, “so we are waiting and watching”. Food and Consumer Affairs Minister Piyush Goyal on Friday asserted that restaurants cannot add ‘service charge’ to the food bills, though customers at their discretion can give “tips” separately.

Consumer Affairs Secretary Rohit Kumar Singh on Thursday had said the government will soon come out with a legal framework to stop restaurants levying service charge from customers as the practice is “unfair”. “I am a consumer myself, and service charges are meant for the staff who render services to guests. It is divided among all the serving staff at a restaurant, which they receive it over and above their salaries. We as restaurant owners can add that component in the selling price and mark it up and charge from a consumer, but the serving staff won’t get anything,” Suri claimed.

The government’s move will be a “loss” to these ordinary staffers only, as the extra amount, if added in the selling price, will be also factored in while charing rental commissions by landlords and by aggregators engaged for delivery of food, he said. Suri, who is also a partner in a firm that owns Dhaba Restaurant in Delhi, claimed that other restaurant owners are of the same view. 

Owners of several restaurants in Delhi also said the move “doesn’t augur well” for the industry, but said, there is “nothing final” yet on the service charges issue, and more so it is “not illegal” to levy it. Owner of Raasta Restaurant in Green Park asked if there was anything illegal done by charging it. After a meeting with representatives of associations of restaurants as well as consumers, Consumer Affairs Secretary Singh had said that although the associations claim the practice is legal, the Department of Consumer Affairs is of the view that it adversely affects the rights of the consumers and it is an “unfair trade practice”. The meeting was attended by representatives of NRAI, Federation of Hotel & Restaurant Associations of India (FHRAI) and consumer organisations, including Mumbai Grahak Panchayat and Pushpa Girimaji.

A legal framework will be legally binding on them to stop this practice. Usually, consumers get confused between service charge and service tax and end up paying, he had noted. During the meeting, representatives of NRAI and FHRAI said levying of service charges was not illegal. NRAI in a statement has also said that levy of service charge by a restaurant is a “matter of individual policy” to decide if it is to be charged or not. “There is no illegality in levying such a charge. Information regarding the amount of service charge is clearly mentioned or displayed by restaurants on their menu cards and otherwise also displayed on the premises, so that customers are well aware of this charge before availing the services,” it said.

After a customer is made aware of such a charge in advance and then decides to place the order, it becomes an agreement between the parties, and is “not an unfair trade practice,” the NRAI claimed. “Levy of service charge is beneficial for the workmen as a class who are employed in the establishments. Any move to the contrary would be detrimental to the interests of workers – and against the labour-friendly stance of the government,” it added. NRAI, founded in 1982, represents the interests of over 5 lakh restaurants, an industry valued at Rs 4,23,865 crore, the statement said.

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