Govt Says Pay Service Charge Only If You Wish To, But Will This System Work?



Finally, Government of India had to issue a press release issuing directives for service charge, which is currently being forcefully charged by restaurant owners.

In a press release published by Press Information Bureau, Govt. has made it clear that service charge is an optional charge, and the customer only needs to pay it if he or she wants to pay.

Or in other words, restaurant and hotels cannot simply force a service charge on the customer.

The press release said, “The department of Consumer Affairs, Central Government has called for clarification from the Hotel Association of India, which have replied 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”

Last year in the month of November, we had reported that Govt. has declared service charge as illegal, if there is no consent from the customer. However, that was said via a written reply in Lok Sabha. And this time, the same has been convened via official press release.

And, this is not the end of the story. Govt. has mentioned The Consumer Protection Act, 1986 in their notification, and has encouraged all customers, end-users of services to complaint against the seller, or service provider if the services or products sold doesn’t meet expectations.

In fact, the customer is now free to complain against the restaurant owner, if they see that service charge is being forcefully charged on the main bill.

Govt. of India said, “The Consumer Protection Act, 1986 provides that 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 and that a consumer can make a complaint to the appropriate consumer forum established under the Act against such unfair trade practices.”

Govt. has made it clear that service charge is simply another fancy term for ‘tips’; and the customer cannot be forced to pay it. If you like the services offered, and if you want to pay the ‘tip’, you can.

Currently, service charge which is being forcefully charged by the restaurant owners is between 5-20% of the total bill.

But Doubts Still Remain..Will This System Work?

Despite Govt. clarifying explicitly, several doubts still remain over the very concept of service charge. For instance, at which point can the customer say no to the service charge being billed?

Usually, the menu card has this information that a separate service charge (between 5-20% normally) would be charged on the bill. Now, once the food has been ordered, then can the customer deny seeing that information and thus refusing to pay the service charge?

Although Govt. has said that various state governments should ensure that the hotels, restaurants highlight this message of ‘voluntary service charge’, but still, doubts remain.

Just for information, there is a major difference between service tax and service charge, as we mentioned in this post: Service Tax is a tax which service providers has to pay to the Govt., but they instead charge from the customers. It is 15% right now, which is charged on 40% of the total food bill (including service charge, if billed). This includes Krishi Kalyan Tax of 0.5% and Swachh Bharat Tax of .5%.

Besides, there is VAT charged which depends on state to state. In Delhi, for instance, VAT is 20% on the alcohol bill and 12.5% on the food bill (which includes service charge, if billed).

It would be interesting to observe how restaurant and hotel owners respond to the Govt directives on service charge, and how the customers respond to this.

Are you willing to pay 5-20% as tip to the restaurant owner, waiter, everytime to use their services? Do let us know by commenting right here!

Editors Note: In my personal opinion, majority of people are not going to take the risk of fighting/debating with restaurants. Rather they will just pay the Service Charge and leave. In my view, the earlier system was much better, where SC was not included in the bill, and customer would pay Tip as they liked. I think Govt should revert back to the same system, otherwise it will not work and Consumers will still need to pay Service Charge everytime as per whims and fancies of the restaurant!

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