Payment of Service Charges to Restaurants: Voluntary and not Compulsory

Payment of Service Charges to Restaurants: Voluntary and not Compulsory

Executive Summary:

This article describes:

• • • This article contains thorough information about the Central Consumer Protection Authority’s guidelines on voluntary payment of Service Charge to restaurants.
    • Also highlights the importance of these newly introduced guidelines to the customers.

Introduction:

The Central Consumer Protection Authority is a regulatory body established under Section 10(1) of the Consumer Protection Act, 2019 in relation to matters affecting consumer rights caused by individuals or entities engaging in unethical business practices or by the publication of unsuitable or incorrect advertisements that affect the public interest. It also contributes to the promotion of consumer trust by upholding consumer rights through efficient regulations. According to recommendations set forth by the Central Consumer Protection Authority (CCPA), service fees should not be added to food bills automatically or by default by hotels or restaurants. The CCPA has produced a list of updated rules in this regard. The option to pay the fee or a tip is entirely up to the consumer; they cannot be coerced into doing either.

New Guidelines by CCPA:

The Central Consumer Protection Authority (CCPA) has issued five main guidelines to restaurants and hotels that levy a high service charge on invoices and force customers to pay it. These are what they are:-

• No hotel or restaurant may automatically or obtrusively include a service charge in the bill.
• It is prohibited to collect the service fee from customers under any other name.
• The hotel or restaurant must let the client know that paying the service charge is optional, discretionary, and at the client’s discretion and that they will not pressure the client to do so.
• A consumer cannot be refused access or services by hotels or restaurants because they are trying to collect a service fee.
• No service fee shall ever be gathered in the pretext of GST or added in any way to the overall cost of the food bill.

In accordance with Section 18(2) (I) of the Consumer Protection Act, 2019, the CCPA published these instructions. These rules supplement the government’s 2017 guidelines, which stated that the service charge is entirely voluntary.

What exactly is the service charge that hotels impose:

Restaurants frequently add a “service charge” category to the bill that ranges from 5% to 15% in tips. It is intended to cover the cost of the person who arrives to serve you. The government had stated in 2017 that service charges were now entirely optional and not required, in accordance with the established criteria. Customers encounter numerous issues as a result of the fact that service charges are still added, sometimes under other names. Additionally, there have been situations where disputes over Service Charge payments resulted in fatalities. Thus, the rules are established for the benefit of the customers. Additionally, these rules demanded that eateries pay their employees fair wages and salaries.

Importance of the New Guidelines to Customers:

Customers should pay close attention to the rules because they can utilize them to avoid being pressured or, in some cases, even coerced into paying the service costs. In order for people to understand their rights, customers should be fully informed of these principles and even spread the word about it. Additionally, they are able to file a complaint by calling 1915, the number for the National Consumer Helpline. Additionally, complaints may be submitted to the Consumer Commission or the District Collector.

Conclusion:

The government has encouraged restaurants that they should pay fair wages to their personnel and increase product pricing to cover the cost rather than expecting customers to pay the service charges. These new guidelines also give clients the option to call 1915 or use the NCH mobile app to submit complaints on the Helpline, which acts as an extrajudicial alternative dispute resolution procedure before going to court. Complaints can also be emailed to the CCPA at com-ccpa@nic.in.

Regards,
Legal Team

Proind Business Solutions Private Limited
212, Tower C, I-thum, Plot No A-40, Sector 62, Noida, UP, India- 201301
No.: +91 120 4224203
Email: info@proind.in, website: www.proind.in