Tag Archives: service charge

Gurbaxish Singh Kohli, VP, FHRAI said, “Most of these guidelines issued by CCPA are already followed by hotels & restaurants. It’s extremely disheartening that the hospitality industry is constantly singled out. We have explained over and over again that there is nothing illegal in collecting a service charge.” 

FHRAI has clarified that service charge, like any other charge collected by an establishment, is a part of the invitation offered by the restaurant to the potential customers. It is for the customers to decide whether they wish to patronise the said restaurant or not. To discuss and seek clarity on the matter, the Department of Consumer Affairs (DoCA) has called FHRAI for a meeting on June 02.

In the wake of a statement issued by the Department of Consumer Affairs on Jan 02, 2017 implying Service Charge billed by restaurants are optional, the Hotel and Restaurant Association of Western India (HRAWI) has come out with a clarification to all industry stakeholders. In a letter to the Department of Consumer Affairs, the Federation of Hotel and Restaurant Associations of India (FHRAI) the apex body of hotels and restaurants, has appealed for withdrawal of the advisory as it has been creating chaos and disruption in the smooth functioning of restaurants across the country. The association has clarified that there is nothing illegal about levying the fee and has citied judgements by the National Consumer Disputes Redressal Commission, New Delhi which is the highest consumer forum of the country as well as by the Hon’ble Supreme Court, which have upheld the legitimacy of this practice. The association has pointed out to cases in which the practice of levying a Service Charge has been upheld by the law. In one of the cases, the National Consumer Disputes Redressal Commission, New Delhi in Nitin Mittal vs. Pind Baluchi, (2012) NCDRC 444 the Association has been advised that such a practice is not an “unfair trade practice” within the Consumer Protection Act. In another case, the Hon’ble Supreme Court too has specifically acknowledged the practice of including “service charge” in the bill by hoteliers and other cases in lower courts which too have recognized the practice. “Service charge is the amount paid to the staff of the restaurant or other similar establishments. An establishment may choose to include this amount in the bill itself and the percentage may vary from 5 per cent …

The Department of Consumer Affairs, Central Government has called for clarification from the Hotel Association of India, which have replied that the service charge is completely discretionary and should a customer be dissatisfied with the dining experience he/she can have it waived off. Therefore, it is deemed to be accepted voluntarily. The Department of Consumer Affairs has asked the State Governments to sensitize the companies, hotels and restaurants in the states regarding aforementioned provisions of the Consumer Protection Act, 1986 and also to advise the hotels/restaurants to disseminate information through display at the appropriate place in the hotels/restaurants that the ‘service charges’ are discretionary/ voluntary and a consumer dissatisfied with the services can have it waived off. A number of complaints from consumers have been received that hotels and restaurants are following the practice of charging ‘service charge’ in the range of 5-20%, in lieu of tips, which a consumer is forced to pay irrespective of the kind of service provided to him. The Consumer Protection Act, 1986 provides that a trade practice which, for the purpose of promoting the sale, use or the supply of any goods or for the provision of any service, adopts any unfair method or deceptive practice, is to be treated as an unfair trade practice and that a consumer can make a complaint to the appropriate consumer forum established under the Act against such unfair trade practices.