Hotels, restaurants barred from levying service charge by default

NEW DELHI: The Central Consumer Protection Authority (CCPA) on Monday barred hotels and restaurants from levying service charges automatically or by default in food bills. It allowed customers to file complaints in case of violation with the consumer commissions, including through ‘e-daakhil’, and even district collectors.
The authority, set up under the Consumer Protection Act, has issued detailed guidelines specifying the duties of eateries and the rights of customers and termed levying of service charges as “unfair trade practice”. It has prohibited the eateries to collect such charges in any other name. The CCPA also said hotels and restaurants must not link the entry of a customer and consumption of food to the service charge. Customers must be informed that any such payment is at their discretion, say the guidelines.


The Authority has said service component is inherent in the price of food, which covers both the material and service. “There is no restriction on hotels or restaurants to set the prices at which they want to offer food or beverages to customers. 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 under the Act,” said the guidelines.
Gurbaxish Singh Kohli, vice president of Federation of Hotel and Restaurant Associations of India, said they have been following most of the guidelines issued by CCPA. He said there is nothing illegal in collecting a service charge. “It is a charge collected for the benefit of the staff, including everyone from waiters to the personnel working in the kitchen, who have served a consumer directly and indirectly. Besides, no hospitality establishment coaxes a consumer to pay it if for any reason they choose not to. But the industry is being painted as the black sheep in the eyes of the consumer for no reason,” he said.
TOI had on Saturday reported on the government’s move for the new provisions to do away with service charge as a whole and empower customers to file complaints in case there are instances of the amount getting added automatically.
The Authority said tip or gratuity is a payment made by the customers directly to the hotel staff and only after completing the meal, one is in a position to decide whether or not to pay tip and how much.