Unsatisfied Customer Can Refuse To Pay Service Charges In Hotels And Restaurants

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A service charge is an extra charge which is imposed for serving customers in a restaurant. It is important to mention that laws relating to consumer affairs has clearly mentioned that paying service charge is optional. However, a recent Supreme Court judgment has further clarified that a customer will be at liberty to not pay service charge if he or she is not happy with the service.

According to Press Information Bureau, many consumers complained that hotels and restaurants are indulged in the practice of charging “service charge”, in the range of 5-20%, in lieu of tips which they are forced to pay irrespective of the kind of services provided to them.


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.

After receiving several complaints, the Department of Consumer Affairs, Central Government, had called for clarification from the Hotel Association of India, which has replied that the service charge is completely discretionary and should a customer be dissatisfied with the dining experience he or she can have it waived off. Therefore, it is deemed to be accepted voluntarily.
“Restaurants (sic) are billing service charges in addition to taxes. Service charge is optional. Consumer has a discretion to pay or not,” tweeted Consumer Affairs and Food Minister Ram Vilas Paswan.

The Department of Consumer Affairs has asked the State Governments to make sure that the hotels and restaurants are made aware of the new policy and that notices must be put up informing customers that service charge is discretionary and can be waived for an unhappy customer.

The National Restaurants Association of India (NRAI), an industry lobby group, is considering its options in response to the government’s statement. The Restaurants’ body quoted judicial precedents in support of imposing service charges. It also issued a statement implying that customers were free not to eat at a restaurant if they did not wish to pay the service charge levied by it.
“We’ll move the courts against this decision,” said Riyaaz Amlani, President, NRAI and Chief Executive of Impresario Entertainment and Hospitality Pvt. Ltd, which runs the popular Smoke House Deli restaurants and the Social chain of bars and cafes.

Amlani said, “A restaurant or a hotel has every right to charge a fee for the service it provides, and also (decide) the quantum of the fee. A consumer has every choice not to come the next time. Service fee is charged legally and the restaurants pay necessary taxes to the government on the service charges. If it is made optional, and restaurants decide not to put it in bills, a parallel economy emerges based on tips that waiters may get from consumers and that will always be unaccounted.”

Chef and restaurateur Manu Chandra, who runs Monkey Bar outlets across India, in a statement to India Times said that the move would result in a refactoring of prices as service charges were a way to remunerate staff. “Rentals, competition and salaries are rising. The restaurants will have to take a couple of days to work on alternate ways to meet these costs,” Chandra said.
Now, remember next time you decide to dine out and if you are not satisfied with their service, your service charge can be waived off.

Source : Livemint

Source: PIB

Source: Times Of India

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