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Last updated: December 3, 2016 at 10:49 am

Customer Consent A Must For Including Service Charge In Bill; If Not, Then Service Charge Is Unfair, Illegal!

service charge rules in India
Hotels should ask the customer, whether they can include service charge?

Govt. of India has clarified an important issue pertaining to hotel, restaurant bills, and this time, it is the matter of service charge.

In a path-breaking move, Govt. has declared inclusion of service charge as illegal, unfair trade practice if customer’s consent is missing regarding the service charge. If the customer feels that service charge has been included in the bill without his or her approval, then complaint can be filed against that service provider, and Consumer Affairs Department can take action as well.

This was revealed by the Govt. in a written reply to a question inside the Lok Sabha.

Last year, we had clarified that service charge is not same as service tax. While service tax is being charged by the Govt., service charge is an alias for ‘enforced tips’ to the hotel staff for providing their services.

This is the reason that for a bill of Rs 1000, restaurants can add Rs 100 as service charge, and then include service tax on 40% of the main bill + service charge (Rs 1100), rather than only the main bill (Rs 1000).

How Can Hotels Charge Service Charge Now?

As per an official from Consumer Affairs Ministry, every hotel and restaurant will be soon ordered to display a notice inside their compounds, wherein they will seek the customer’s approval before charging service charge.

The official said, “We will also issue an advisory to hotels and restaurants to display prominently that consumers have a choice to pay or not pay the charge. Charging anything without informing them falls under unfair trade practice.”

This clearly means that in case there is no such notice or information, and still the restaurant or the hotel includes a service charge in the main bill, then it shall be unlawful and unfair trade practice.

Govt. Is Aware Of The Service Charge Issue

Another interesting revelation was made in this case. Govt. of India is fully aware about the issues pertaining to service charge, and is right now amending the Consumer Protection Act to make appropriate changes to handle this issue.

Besides, Govt. is regularly in talks with hotels and restaurant owners regarding this issue, and they are getting maximum inputs before finding a feasible solution.

The official said, “We had even asked the hoteliers and restaurant operators, who had responded saying that it’s optional for the consumers to pay the charge..”

Various complaints regarding forceful inclusion of service charge into hotel/restaurant bills has finally made the Govt. aware that this extra charge is infact a forced tip, and cannot be made mandatory.

Next time you see service charge in your hotel/restaurant bill, then do question its validity if you have not given consent to it. Govt. has promised to take action.

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