A top ministry official said there is no legal sanctity attached to this levy and the ministry officials flagged to the representatives of the restaurant and hotel owners’ associations that consumers often understand service charge as ‘service tax’ and end up paying this. They also flagged how different eateries charge different rates to include this in the bill.
Union consumer affairs secretary Rohit Kumar Singh chaired the meeting with representatives from National Restaurant Association of India (NRAI), Federation of Hotel and Restaurant Associations of India (FHRAI) and consumer organisations.
Officials maintained that the service charge or tip is voluntary and hence can’t be included in the bill.
The ministry also turned down the claims of representatives from NRAI and FHRAI that when service charge is mentioned on the menu, it involves an implied consent of the consumer to pay the charge. “Considering entry of a customer to a restaurant or hotel as an implied consent to pay service charge is nothing but imposition of an unjustified cost as a condition precedent to placing an order. This falls under restrictive trade practice under the Consumer Protection Act,” said an official. He said the consent to pay the charge must be explicit.
President of NRAI Kabir Suri said: “Service charge is transparent, worker- friendly and also recognised by many judicial orders. The government also earns revenue from the service charge,” he said. But officials said none of the judgements deal with the legality of service charge and paying any tax to government after collecting an extra charge doesn’t mean levying such charge is legal.