With an increase in complaints from consumers about being forced service charge at restaurants, the Department of Consumer Affairs announced that ‘service charge’ should be payable only if the customer is happy with the service. This used to be charged in addition to taxes on the final bill amount.
A service charge is levied over service tax and other taxes that are levied on the bill amount. The service charge ranges between 5% and 20% of the total bill instead of tips, irrespective of the service provided to customers. The service charge is supposed to be distributed amongst all the front line staff as well as the staff behind the scene.
With an increase in complaints against this system, the Department of Consumer Affairs said that adding a compulsory service charge is an unfair trade practice. They requested for clarification from the Hotel Association of India on this matter. They replied that it is not compulsory and is left to the customer. If they are unhappy with the service, they can refuse to pay.
The Consumer Protection Act, 1986 provides that a consumer can make a complaint to the appropriate consumer forum established under the Act against unfair method or deceptive practice, the PIB release says.
The National Restaurant Association of India (NRAI) cited judicial precedent to support its case for the levying of a service charge. They also said that if the customers did not want to pay the service charge, they don’t have to eat at restaurants.
The service charge should be prominently displayed so that the customer can make a decision on whether or not they want to eat there.
While many restaurants charge high prices for the food, customers are ready to shell out the price keeping in mind the location, the brand and the service levels. However, they might not feel comfortable or feel obliged to spend another 10% of the bill to keep the staff happy. They might feel it is a prerogative of the restaurant owners and managers.
On the other hand, it is also true that tipping culture is not very popular in India unlike the countries in the West. Even if there is a high level of service provided, the tip that is meagre.