9 January 2017

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Service Charge for dining in restaurants discretionary: Government


In a move, benefitting the consumers, Government has announced, that ‘service charges’, levied by restaurants along with other taxes, are discretionary and not mandatory. Decision was taken on receipt of number of complaints from consumers that hotels and restaurants are charging 'service charge' in the range of 5-20%, in place of tips, which a consumer is forced to pay irrespective of the kind of service provided to him. Apart from service charge, restaurants charge 12.5% value added tax and 6% service tax. This move is aimed to give respite to consumers at large as many a times the consumers were forced to pay service charge despite poor and unsatisfactory service provided by restaurants and hotels.

According to Consumer Protection Act, 1986 a trade practice which, for the purpose of promoting the sale, use or the supply of any goods or for the provision of any service, adopts any unfair method or deceptive practice, is to be treated as an unfair trade practice. A consumer can make a complaint to the appropriate consumer forum established under the Act against such unfair trade practices. Accordingly, Hotel Association of India, have replied to the clarification sought by Department of Consumer Affairs, Central Government stating that, the service charge is completely discretionary and should a customer be dissatisfied with the dining experience he/she can have it waived off. Therefore, it is deemed to be accepted voluntarily.

State Governments are asked to sensitize the companies, hotels and restaurants in their respective states regarding aforementioned provisions of the Consumer Protection Act, 1986. Further, State Government are required to advise the Hotels/Restaurants to disseminate information through display at the appropriate place in the hotels/restaurants that the 'service charges" are discretionary/ voluntary and a consumer dissatisfied with the services can have it waived off.

Department of Consumer Affairs has declared that making service charge compulsory is an unfair trade practice. Now the customer in a restaurant, if not satisfied with the services offered therein have the right to say no to service charge and cannot be forced to pay the same.

Tags : Service charge Restaurant Discretionary

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