Hotels and restaurants have recently been barred from levying the service charge automatically or by default in food bills. The Central Consumer Protection Authority (CCPA) on July 4 issued guidelines to prevent unfair trade practices and contravention of consumer rights with regard to the imposition of service charge. As per the CCPA guidelines, “No hotels or restaurants shall add service charge automatically or by default in the bill." Under the guidelines issued, a consumer can lodge a complaint against the respective hotels and restaurants by dialling 1915.
Let’s take a look at what are these guidelines and what consumers can do in case of a violation of these guidelines?
What do the CCPA guidelines say?
Five major guidelines have been issued by the CCPA concerning the levy of service charge by restaurants and hotels, which for a long time has been a contentious issue and has often actuated complaints from consumers. As per the guidelines: -
1. No hotel or restaurant shall add service charge automatically or by default in the food bill
2. The service charge shall not be collected from consumers by any other name
3. No hotel or restaurant can force a customer to pay service charge. They have to clearly inform the customer that the service charge is voluntary, optional, and customer’s discretion
4. No restriction on entry or provision of services based on collection of service charge shall be levied on consumers
5. Service charge cannot be collected by adding it along with the food bill and levying GST on the total bill amount
Why the guidelines have been issued?
An unsavoury ruckus over tipping at hotels and restaurants has been brewing in India for a few years with customers complaining that they were not apprised about this additional charge. The CCPA took cognisance of the grievances concerning the service charge imposition by hotels and restaurants without asking or informing customers. On June 2, the government held a meeting with the National Restaurant Association of India (NRAI) on the issue, stating that it had received a lot of complaints from customers that they were still being forced to pay service charges “often fixed at arbitrarily high rates” and that they “are harassed if they request to remove it from the bill.” However, the NRAI defended the practice, stating that it was a “matter of individual policy” and that levying such a charge was not “illegal”.
Post the meeting, the government announced that it would soon come out with a “robust framework” to ensure strict adherence to its 2017 guidelines which disallowed the levy of service charge. A day later on June 3, addressing a press conference, Union Food and Consumer Affairs Minister Piyush Goyal said hotels and restaurants cannot ask customers to pay hidden charges. He added that the hotels and restaurants can increase the wages of their workers by raising rates, as there is no prohibition on that, but they cannot levy a charge by deceit.
What can a customer do in case a hotel or restaurant still levies service charge on food bill?
If any customer finds that a hotel or restaurant is levying the service charge, which is a clear violation of the CCPA guidelines, he/she has four options at various levels of escalation. These are as follows: -
The customer can request the concerned hotel or restaurant to remove it from the food bill amount.
The customer can also lodge a complaint on the National Consumer Helpline (NCH), which functions as an alternate dispute redressal mechanism at the pre-litigation level, by dialling 1915, or through the NCH mobile app.
The customer can file a complaint with the Consumer Commission, or through the edaakhil portal - http://www.edaakhil.nic.in
The customer can file a written complaint with the District Collector of the concerned district for investigation and ensuing proceedings by the CCPA. The customer can submit a direct complaint to the CCPA by sending an e-mail to firstname.lastname@example.org
Does This Mean Customers Will Have To Pay Less For Dining Out?
If customers think they will have to shell out less money for food now, they are mistaken. CCPA, in its detailed guidelines, has stated that there is no restrain on hotels or restaurants to set the prices for their food and beverages. Thus, “Placing an order involves consent to pay the prices of food items displayed in the menu along with applicable taxes.” However, many restaurant owners opine that this may not benefit the customers as the restaurants and hotels will raise the prices of their food and beverage items, making customers pay more than they earlier were.
What Do Hotels And Restaurants Say?
During their meeting with the Department of Consumer Affairs under the Ministry of Consumer Affairs, Food & Public Distribution on June 2, the NRAI said that the levy of service charge by hotels and restaurants is a “matter of individual policy” and that it is not illegal to levy such a charge. The representatives of the hotel and restaurant industry added that service charge brings in additional revenue to the government too since restaurants pay a tax on what they charge customers.