Service Charges On Food: Know What Are The Guidelines

A service charge is a fee collected by the hotel or restaurant when customers dine out. As a result, this service tax has come under scrutiny, and the Centre has warned restaurants against this practice citing guidelines issued in April 2017, which said that an individual's entry into a restaurant cannot be construed as consent to pay a service charge.

Difference Between Service Charge And Service Tax

As the name suggests, the Service Charge is a voluntary amount that customers can pay at their discretion. Service tax, on the other hand, is a tax that the government levies on services.

In the hospitality industry, service charges are fees that are charged for providing service to customers. In most restaurants/hotels, it is added to the total bill and typically ranges from 5-10%. A service charge is collected when a server serves the customer.

For Customers

When a customer sees the bill of a restaurant that includes hefty amount of taxes in addition to the food, it becomes quite frustrating. Despite the fact that customers and the Government believe a service charge is a way to replace tips, and that it should be voluntary, this debate has been going on for 5 years now.

“It has been pointed out in the letter that consumers are forced to pay service charge, often fixed at arbitrarily high rates by restaurants. Consumers are also being falsely misled on the legality of such charges and harassed by restaurants on making a request to remove such charges from the bill amount,” said a statement issued by the Department of Consumer Affairs on Monday.

Government Guidelines

As per the Guidelines by the Ministry Of Consumer Affairs, hotels and restaurants charging tips from customers "without their express consent in the name of service charges" constitute unfair trade practices. It said that the bill “may clearly display that service charge is voluntary, and the service charge column of the bill may be left blank for the customer to fill up before making payment.”

Unfair commercial conduct would mean charging anything other than the rates listed on the menu card or restricting the customer's access or compelling him or her to pay the service charge as a condition of placing an order.

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When a consumer is made aware of a charge in advance and then agrees to place an order, the two parties have reached an agreement, which is not an unfair trade practice. According to the association, GST is also paid to the government on the aforementioned price.

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What Should The Consumer Do?

In such circumstances, the consumer has the right to be heard and redressed by a Consumer Disputes Redressal Commission/Forum. Ypu can also read how entertainment act has impacted our outings.

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