Some pubs continue to collect service charge despite new rule

They argue adding tips to the bill is not illegal if customer consent is obtained

The order barring restaurants from collecting a service charge with the bill is making no difference at some pubs and restaurants in Bengaluru.

Prominent pubs in Bengaluru are continuing to levy up to 10 per cent as ‘service charge’ — the term they use for tips.

The Central Consumer Protection Authority, a government body based in Delhi, has issued guidelines barring restaurants from levying a service charge by default from July 4.

Some restaurants are citing those very guidelines to say they can continue collecting tips with the bill after informing customers about it.

“According to the guidelines, we can levy a service charge, but the customers have to be made aware beforehand. We have a board right at the entrance about the service charge and it is also mentioned on every page of the menu,” says Mukesh Tolani, co-owner of microbrewery Toit in Indiranagar. If the customers do not want to pay the charges, “it will be taken off right away,” he says.

The Central Consumer Protection Authority, set up under the Consumer Protection Act of 2019, deems the default collection of service charge as an unfair trade practice (see box).

Social, a pub with five branches in the city, also continues levying a service charge. “We first check with the customers if they would like to pay. If they want to, we add it to the bill,” say Ranveer Sabhani, business head-south, Impresario, the company that runs the pub.

Bannerghatta Road-based Gatsby Cocktails and Cuisine, which opened earlier this year, is testing the waters for a month before deciding what to do. “Until we get better clarity, we thought it would be best to remove the charge completely. Customers have been increasingly complaining about the charge,” Nikil Sharma, general manager, told Metrolife.

An advocate says the guidelines don’t make collecting a service charge illegal. “It’s all about getting the consent of customers,” he explains. If a restaurant adds the service without the approval of the customer, the customer can file a complaint with the consumer commission.

Prices hiked

To make up for the loss from service charge, many restaurants and pubs plan to increase their menu
prices.

“Now there is a negative connotation attached to the whole concept of a service charge. So, we have decided to move away from it. This will inevitably lead to an increase in our prices,” says Chetan Hegde, owner of 1522, a chain of pubs.

The increased menu prices will help the restaurant staff make ends meet, says Chetan.

“The menu prices will be increased by 10% percent at some of my outlets where service charge was not already inclusive. This will then be pooled and divided among the staff on the basis of the points system,” he explains.

‘Easy to file a complaint’

“If the customers find any restaurant not complying with the guidelines, they can easily file a complaint with the consumer commission,” says
Y G Muralidhar, consumer rights activist.

He believes Bengaluru is lacking in a strong consumer rights group. “Other cities have prominent groups that help consumers. We need one in Bengaluru,” he adds.

If you find a restaurant violating the guidelines you can:

Call the National Consumer Helpline (Call 1915). Approach a consumer commission. Complaint can be filed electronically through the e-daakhil portal.

What is causing the legal quibbling

The Central Consumer Protection Authority, Delhi, issued a set of guidelines on July 4, clearly prohibiting the addition of a service charge in the food bill:

A component of service is inherent in (the) price of food and beverages offered by the restaurant or hotel. Pricing of the product thus covers both the goods and services component… Charging anything other than the said amount would amount to unfair trade practice under the (Consumer Protection) Act.

Some pubs and restaurants are citing the following lines, appearing later in the same Central Consumer Protection Authority document, to claim that they can add the service charge in the bill provided they inform customers about it in advance:

No hotel or restaurant shall add service charge automatically or by default in the bill.

No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer’s discretion.