Govt to Finalise Stringent Framework to Check Service Charge by Restaurants and Hotels

The Department of Consumer Affairs will soon come up with a robust framework to ensure strict compliance by stakeholders with regard to service charge levied by restaurants and hotels as it adversely affects millions of consumers on a daily basis, an official statement said.

The Department held a meeting, chaired by Consumer Affairs Secretary Rohit Kumar Singh, here on Thursday with restaurant associations and consumer organisations on the issue of service charge in hotels and restaurants.

Representatives of major restaurant associations including the National Restaurant Association of India (NRAI) and the Federation of Hotel & Restaurant Associations of India (FHRAI) and consumer organisations and activists including Mumbai Grahak Panchayat, Pushpa Girimaji etc, were present.

During the meeting, major issues raised by consumers on the Department's National Consumer Helpline relating to service charge such as compulsory levy of service charge, adding the charge by default without express consent of consumer, suppressing that such charge is optional and voluntary, and embarrassing consumers if they resist paying such charge etc. were discussed.

Further, guidelines on fair trade practices related to charging of service charge by hotels/restaurants dated April 21, 2017 published by the Department were also taken up.

The restaurant associations observed that when service charge is mentioned on the menu, it involves an implied consent of the consumer to pay the charge. Service charge is used by restaurants/hotels to pay the staff and workers and is not charged for the experience or food served to consumer by the restaurant/hotel, they contended.

However, consumer organisations observed that levying service charge is patently arbitrary and constitutes an unfair as well as restrictive trade practice under the Consumer Protection Act. Questioning the legitimacy of such charge, it was highlighted that since there is no bar on restaurants/hotels on fixing their food prices, including an additional charge in the name of service charge is detrimental to the rights of consumers.

As stated in the April 21, 2017 guidelines, placing an order by a customer amounts to his agreement to pay prices in the menu along with applicable taxes. Charging for anything other than the aforementioned, without express consent of the consumer, would amount to unfair trade practice under the Act. Further, considering entry of a customer to a restaurant/hotel as an implied consent to pay service charge would amount to imposition of an unjustified cost on customer as a condition precedent to placing an order for food and would fall under restrictive trade practice under the Act.