Service charge row: FAITH seeks retraction from Consumer Affairs ministry

FAITH believes that levying of service charge on invoices is a healthy, cashless practice designed to motivate staff through an additional financial incentive. Levy & proportionate distribution of ‘service charges’ enable enhanced financial support to staff from lower economic groups. FAITH has requested ‘urgent’ intervention of Secretary-Tourism, Government of India, Secretary-Consumer Affairs, Deputy Secretary-Consumer Affairs, & Tourism Secretaries of all state governments, on the issue. The association has recommended a retraction to be released from MCA to secretaries – food, civil supplies & consumer protection. FAITH has opined, that service charges wherever they are levied on invoices, are pre-disclosed on the menu, where it normally says that ‘service charges & government taxes as applicable are extras’. Whenever consumers order, it is implied that they are legally aware of that food service establishment’s disclosed commercial policies and offer of sale. Service tax is thereafter, levied on service charge which is remitted to department of revenue and adds to our country’s indirect tax collections. Once they are disclosed and thereafter accepted by the consumer, it is thus not an unfair consumer practice. FAITH has voiced concern that the ‘letter ‘ by Ministry of Consumer Affairs may create confusion in the minds of diners when they eat out.
Additionally, it has the potential to create an unhealthy distrust towards food service establishments among those diners who may not be able to discern distinction between service charge & service tax. Furthermore, if service charges start getting disputed by consumers, it may create unwanted litigation hotel / restaurants & department of revenue, since service tax is levied on all service charges on invoices. All in all, there is scope for large scale litigation & a business environment of distrust, across the country between diners, food service establishments & ‘department of revenue’ Government of India.