17 June 2024

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Government Makes Service Charge Completely Voluntary


The Central Government has approved guidelines making service charge “completely voluntary”. As per the guidelines, levy of service charge amounts to unfair trade practice. Guidelines envisage that, service charge column will be left blank in the bill for the customers to fill up before making payment. A customer can file a complaint in Consumer Court in case of levy of service charge by any Hotel and restaurant. Government move is aimed to give respite to consumers at large as many times, consumers were forced to pay service charge despite poor and unsatisfactory service provided by restaurants and hotels.

Presently, Consumer Protection Act, 1986 does not empower the Ministry to take stringent action against hotels levying service charge as mandatory. But, under new Consumer Protection Bill, an authority is expected to be set up with powers to take such actions. According to guidelines, component of service is inherent in food and beverages ordered by a customer for which charges would be paid. Hence, price of food and beverages includes both goods and service components. A Customer cannot be forced to pay service charge.

As per 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. Guidelines would play a significant role giving relief to consumers. 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. Guidelines are being sent to states for necessary action at their ends. Amendment would soon be effected adding provisions relating service charge practice.

Tags : Service charge Voluntary Approval

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