CCPA says no restaurants can force to pay service charges; restaurateurs' voices it as an unfair announcement

There was continuous issues raised by the consumer on levy of service charges by the restaurants and hotels and looking at this the Central Consumer Protection Authority (CCPA) on Monday issued guidelines regarding the service charges in bills added by hotels and restaurants. With the guidelines, the government clarified that the service charge is completely illegal in India.

According to the report, the CCPA has issued guidelines for preventing unfair trade practices and violation of consumer rights with regard to levying of service charges in hotels and restaurants.

Commenting on the same Akshay Anand, Co-founder, Cosy Box and Ophelia mentioned, “All over the world Governments have gone out of their way to bail out restaurants - with free outdoor spaces, loans, grants and excess freedom to recover completely from the pandemic. Not only has our government done nothing they are basically making it more difficult for restaurants to operate and in this case curtailing wages of staff.”

Also Read: Service Charge issue: 7 reasons why it's not illegal

He also pointed that hospitality industry is one of the biggest employers after Indian railways and Indian restaurant and food service industry is at size four trillion Indian rupee and hence the government should reconsider this guidelines as it will be a major blow for the staff whose working so hard day in day out to give the best experience to the customers with their service.

The guidelines issued by CCPA also pointed that hotels/restaurants shall not add service charge automatically or by default in the food bill. No collection of service charge shall be done by any other name, the guidelines added.

The guidelines also clearly pointed that no hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer’s discretion. No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers.

"There is no restriction on hotels or restaurants to set the prices at which they want to offer food or beverages to customers. Thus placing an order involves consent to pay the prices of food items displayed in the menu along with applicable taxes. Charging anything other than the said amount would to unfair trade practice under the Act," it added.

Mentioning this as an unfair announcement, Amit Bagga, Co-founder and CEO Daryaganj Hospitality said, “Whatever we charge is a part of our taxable income and we also levy GST on it so why should there be an issue. We have done major investments and have very high fixed costs and profit margins of maybe 10-15%, so whatever we call it ultimately it’s a price customer pays to avail services from us and we have clearly declared it everywhere, by putting on every page of the menu and also a hording outside the entrance.”

Bagga also pointed that why only the restaurant industry is being singled out even airlines, cinemas, automobile dealerships and many other service companies charge an extra fee to their customer, just that there is a different name like convenience fee, file charges, service fee etc.

CCPA also pointed that the service charge shall not be collected by adding it along with the food bill and levying GST on the total amount. And, shared that if any consumer finds that a hotel or restaurant is levying service charge in violation to the guidelines, a consumer may:-

- Make a request to the concerned hotel or restaurant to remove service charge from the bill amount.

- Lodge a complaint on the National Consumer Helpline (NCH), which works as an alternate dispute redressal mechanism at the pre-litigation level by calling 1915 or through the NCH mobile app.

- File a complaint against unfair trade practice with the Consumer Commission. The Complaint can also be filed electronically through e-daakhil portal www.e-daakhil.nic.in  for its speedy and effective redressal.

- Submit a complaint to the District Collector of the concerned district for   investigation and subsequent proceeding by the CCPA. The complaint may also be sent to the CCPA by e-mail at com-ccpa@nic.in.

Citing this as a big blow to the employees of the F&B fraternity, Sahil Sambhi, Co-founder and Director, Molecule added, “paying service charge was not mandatory but if the service was good the customer used to happily oblige paying SC and seldom used to ask us to remove it but passing a guideline where we cannot charge service charge itself is a big loss to the remuneration of the staff and may result in many shifting their professions.”