Hotels, Restaurants Barred From Levying Service Charge
No hotel or restaurant can force a consumer to pay service charge.
The Central Consumer Protection Authority on Monday barred hotels and restaurants from levying service charge automatically or by default in food bills and allowed customers to file complaints in case of violation.
Amid rising complaints, the CCPA has issued guidelines for preventing unfair trade practices and violation of consumer rights with regard to levying of service charge.
As per the guidelines, "No hotels or restaurants shall add service charge automatically or by default in the bill." There should not be any collection of service charge by any other name, it added.
Restaurants and hotels generally levy a service charge of 10% on the food bill.
No hotel or restaurant can force a consumer to pay service charge. They have to clearly inform the consumer that service charge is voluntary, optional and at consumer's discretion.
"No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers," the guideline said.
The guidelines state that a component of service is inherent in price of food and beverages offered by a restaurant or hotel.
"Pricing of the product covers both the goods and services component. There is no restriction on hotels or restaurants to set the prices at which they want to offer food or beverages to consumers."
Further, service charge cannot be collected by adding it along with the food bill and levying GST on the total amount.
"Thus placing an order involves consent to pay the prices of food items displayed in the menu along with applicable taxes. Charging anything other than the said amount would amount to unfair trade practices under the (Consumer Protection) Act," the guidelines said.
The CCPA, in its guidelines, said a tip or gratuity is towards hospitality received beyond basic minimum service contracted between the consumer and the hotel management, and constitutes a separate transaction between the consumer and staff of the hotel/restaurant at the consumer's discretion.
Only after completing the meal, a consumer is in a position to assess the quality as well as service and decide whether or not to pay a tip and if so, how much.
The decision to pay a tip by a consumer does not arise merely by entering the restaurant or placing an order.
If any consumer finds that a hotel or restaurant is levying service charge in violation of the guidelines, s/he can request the concerned establishment to remove it from the bill amount.
The consumers can also lodge a complaint on the National Consumer Helpline, which works as an alternate dispute redressal mechanism at the pre-litigation level, by calling 1915 or through the NCH mobile app.
They can also file complaints with the Consumer Commission.
Reacting to the guidelines, Gurbaxish Singh Kohli, vice president, Federation of Hotel and Restaurant Associations of India, told PTI that it will study the order as it will have "far reaching consequences" and approach the government thereafter, adding that the sector should not be "singled out."
"If you want to make rules and regulations, you please make a law and make all the people also follow the law," Kohli said.
"We just got the order. We will be studying it in the next few days. We will approach the government obviously because we will tell them just don't single us out. Please ensure that other people also don't do it. Don't single us out," he added.