No to Service Charge (Download PDF)

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The new rule gave relief to many customers who loved food. The service charge we pay at the hotel shall not be mandatory and it’s totally voluntary. This has been said by the food and consumer affair minister Ram Vilas Paswan after the government approved the relevant.

No to service charge on Food

No to Service Charge on Food

No to service charge on Food

The act: -

  • The establishments will not decide how much has to paid by the customer for the services
  • He has to be left on the discretion of the customer
  • Any kind of tax that will be levied on the customer with his consent shall be considered as the unfair trade practice
  • Service tax will not be tax but it shall be a tip
  • The information should be displayed by the hotels and restaurants regarding the tax
  • This is a right of the customer to refrain from paying the charge if they were not satisfied with the service

The guidelines: -

(1) A component of service is inherent in provision of food and beverages ordered by a customer. Pricing of the product therefore is expected to cover both the goods and service components.

(2) Placing of an order by a customer amounts to his/her agreement to pay the prices displayed on the menu card along with the applicable taxes. Charging for anything other than the afore-mentioned, without express consent of the customer, would amount to unfair trade practice as defined under the Act.

(3) Tip or gratuity paid by a customer is towards hospitality received by him/her, beyond the basic minimum service already contracted between him/her and the hotel management. It is a separate transaction between the customer and the staff of the hotel or restaurant, which is entered into, at the customer’s discretion.

(4) The point of time when a customer decides to give a tip/gratuity is not when he/she enters the hotel/restaurant and also not when he/she places his/her order. It is only after completing the meal that the customer is in a position to assess quality of service, and decide whether or not to pay a tip/gratuity and if so, how much. Therefore, if a hotel/restaurant considers that entry of a customer to a hotel/restaurant amounts to his/her implied consent to pay a fixed amount of service charge, it is not correct. Further, any restriction of entry based on this amounts to a trade practice which imposes an unjustified cost on the customer by way of forcing him/her to pay service charge as condition precedent to placing order of food and beverages, and as such it falls under restrictive trade practice as defined under section 2 (1) (nnn) of the Act.

(5) In view of the above, the bill presented to the customer may clearly display that service charge is voluntary, and the service charge column of the bill may be left blank for the customer to fill up before making payment.

(6) A customer is entitled to exercise his/her rights as a consumer, to be heard and redressed under provisions of the Act in case of unfair/restrictive trade practices and can approach a Consumer Disputes Redressal Commission/Forum of appropriate jurisdiction.

- Published/Last Modified on: May 1, 2017

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