Price of Service

The Government has issued new guidelines for hotels and restaurants with regards to levying of service charge.

What is a service charge?

A service charge is a fee charged by the hospitality sector from their customers for serving them. Payment of the service charge was voluntary at the discretion of the customers was not mandatory at all as per the earlier guidelines issued by the Department of Consumer Affairs under the Ministry of Consumer Affairs, Food & Public Distribution in 2017.

What was the issue?

Customers frequently complained about some restaurants imposing service charges without their consent, while a few restaurants added them by default. People also complained about how the restaurant would embarrass them if they refused to pay the charge.

How would the Consumer Interest be protected?

The Central Consumer Protection Authority (CCPA) now forbids hotels and restaurants from including a “service charge” in their invoice by default citing their practice as “unfair trade”.

The CCPA has issued five major guidelines which stipulate:

i. No hotels or restaurants shall add service charge automatically or by default options in the billing;

ii. The service charge shall not be collected from consumers by any other manner;

iii. Consumers shall not be forced to pay service charge and to be clearly informed hotels and restaurants that the charge is voluntary, optional, and at the consumer’s discretion;

iv. There shall be no restriction upon the provision of services based on collection and/or payment of service charge imposed on consumers; and

v. Service charge shall not be collected by incorporating and/or adding the same along with the food bill and levying the GST on the total amount.

What can a customer do in case of violation of these guidelines?

Firstly, a customer can make a request to the hotel or restaurant to remove the service charge from her bill;

Secondly, a customer can lodge a complaint on the National Consumer Helpline (NCH) by calling on the number 1915 or on the NCH mobile app as an alternative dispute redressal mechanism at the pre-litigation level;

Thirdly, a customer can lodge a complaint to the Consumer Commission or via e-daakhil portal; and

Finally, a customer can submit a complaint to the District Collector of the concerned district for an investigation and subsequent proceedings to the CCPA by mailing at com-ccpa@nic.in.

Service charge was considered a ‘beneficial’ payment since it was meant for the benefit of the staff of the establishment. However, eventually the guidelines issued shall now put a load on the products and services of the hotels and restaurants.