Service charge

Hotels and restaurants prohibited from charging service fees

No hotel or restaurant will be allowed to add service charges “automatically or by default” to the bill or collect them under another name, a government order announced on Monday.

The order was issued by the Central Consumer Protection Authority (CCPA) after receiving numerous complaints on the National Consumer Helpline that hotels and restaurants were charging a service fee without telling customers it was voluntary and optional.

The CCAC has made it clear that no one should be refused entry or services on the basis of charging a service fee. The service charge should not be collected by adding it to the food bill and deducting GST from the total amount, the order says.

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Describing the collection of service charges as an “unfair commercial practice”, the order stated that a customer could file a complaint with the Consumer Affairs Commission. One can either call the National Consumer Helpline, or file it electronically via www.edaakhil.nic.in, or email it to the CCPA at com-ccpa@nic.in, or write to the Collector of the district concerned.

The CCPA said service charges are levied on top of the full food price by many hotels, often under the cover of other charges, although the service component is inherent in the price of the food and drink offered.

“Product pricing therefore covers both the goods and services component. There are no restrictions placed on hotels or restaurants to set the prices at which they wish to offer food or drink to consumers. Thus, the fact of placing an order implies the consent to pay the prices of the food products displayed on the menu as well as the applicable taxes. To charge anything other than said amount would amount to an unfair business practice,” the order said.

The CCPA has stated that a “tip” is at the consumer’s discretion and relates to hospitality received beyond the “basic minimum service” contracted between the consumer and hotel management and something between consumer and staff.

“It is only after finishing the meal that a consumer is able to assess the quality and service and decide whether or not to tip or tip and, if so, how much. The decision to pay a tip or gratuity by a consumer does not stem simply from entering the restaurant or placing an order,” he said.

Therefore, according to the reason for the order, a service charge cannot be added involuntarily to the bill, without giving consumers the choice or discretion to decide whether or not they want to pay this charge.