Hotels, restaurants barred from levying service charge

As per the guidelines, 'No hotels or restaurants shall add service charge automatically or by default in the bill'

No hotel or restaurant will be allowed to add service charge “automatically or by default” in the bill or collect it in any other name, a government order said 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 and restaurants were charging service charges without informing the customers that it is voluntary and optional.

The CCPA made it clear that no person should be denied entry or services based on collection of service charge. Service charge should not be collected by adding it along with the food bill and levying GST on the total amount, the order said.

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Describing the levying of service charge as “unfair trade practice”, the order said that a customer could file a complaint with the Consumer Commission. One could either call the National Consumer Helpline or file it electronically through www.edaakhil.nic.in or emailing it to CCPA at [e-mail] or writing to the concerned district collector.

The CCPA said service charge is being levied in addition to the total price of food items by several hotels often in the guise of some other charge though the component of service is inherent in the price of the food and beverages offered.

“Pricing of the product thus 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. 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 practice,” the order said.

The CCPA said a ‘tip’ is consumer’s discretion and it is towards hospitality received beyond the “basic minimum service” contracted between the consumer and the hotel management and something that is between the consumer and the staff.

“Only after completing the meal, a consumer is in a position to assess the quality and service and decide whether or not to pay tip or gratuity and if so, how much. The decision to pay tip or gratuity by a consumer does not arise merely by entering the restaurant or placing an order,” it said.

Therefore, the order reasoned, service charge cannot be added in the bill involuntarily, without allowing consumers the choice or discretion to decide whether they want to pay such charge or not.