Service Charge By Restaurants Illegal, Says Govt; Asks NRAI To Immediately Stop It

The consumer affairs ministry on Thursday called the service charge levied by restaurants illegal and asked the National Restaurant Association of India (NRAI) to immediately stop the practice. It said levying the service charge is adversely impacting consumers, sources told CNBC-TV18.

The ministry also said there is no legal sanctity attached to this levy that is charged to consumers and the government will come up with a legal formulation regarding this, according to the sources. The legal formulation will be binding on the restaurants.

Following complaints from consumers, the ministry had scheduled a meeting on June 2 with the National Restaurant Association of India (NRAI) to discuss the issues pertaining to service charges levied by restaurants. Restaurants usually charge a 10 per cent service charge over the total bill.

“The meeting follows as a result of DoCA taking notice of a number of media reports as well as grievances registered by consumers on the National Consumer Helpline (NCH),” the Ministry of Consumer Affairs recently said in a statement while calling the meet.

In a letter to the NRAI recently, Department of Consumer Affairs Secretary Rohit Kumar Singh pointed out that the restaurants and eateries are collecting the service charge from consumers by default, even though the collection of any such charge is voluntary and at the discretion of consumers and not mandatory as per law.

It added that consumers are also being falsely misled on the legality of such charges and harassed by restaurants on making a request to remove such charges from the bill amount. “Since this issue impacts consumers at large on a daily basis and has significant ramification on the rights of consumers, the department construed it necessary to examine it with closer scrutiny and detail,” the letter said.

The consumer affairs department in April 2017 published guidelines on charging of service charge by hotels and restaurants. The guidelines note that entry of a customer in a restaurant cannot be itself be construed as a consent to pay service charge.

“Any restriction on entry on the consumer by way of forcing her/him to pay service charge as a condition percent to placing an order amount to ‘restrictive trade practice’ under the Consumer Protection Act,” the consumer affairs ministry said recently in the statement.

The statement added that the 2017 guidelines mention that placing of an order by a customer amount to his/her agreement to pay the prices displayed on the menu card along with the applicable taxes. Charging for anything other than the aforementioned without the express consent of the customer would amount to an unfair trade practice as defined under the Act.

As per the guidelines, a customer is entitled to exercise his/her rights as a consumer to be heard and redressed under provisions of the Act in case of unfair/restrictive trade practices. Consumers can approach a Consumer Disputes Redressal Commission / Forum of appropriate jurisdiction, the statement said.

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