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New Service Charge Rules: Who Will be Impacted the Most and What it Means for Diners

By: Ira Alok Puranik

News18.com

Last Updated: July 05, 2022, 15:36 IST

A service charge is an additional levy to your total restaurant bill, which is intended to benefit those who served you there. (Representative image/Reuters)

A service charge is an additional levy to your total restaurant bill, which is intended to benefit those who served you there. (Representative image/Reuters)

As per the latest guidelines, hotels and restaurants won't be able to levy service charge on consumers by default

In January 2022, Vani took a couple of her friends for a scrumptious lunch treat at an upscale restaurant in Hauz Khas, Delhi. The occasion? Celebrating her 21st birthday. After hours of fun, food, and banter, Vani was in for a rude shock when the bill came. There were stark price differences between the physical menu and the virtual one.

But what was worse was the outlet’s outright refusal to remove service charges of 10% from the bill even after Vani’s legitimate insistence. In the end, she had to pay up.

But the next time you are out and see “service charges@10%” on your restaurant bill, don’t pay up. As per the Central Consumer Protection Authority’s (CCPA) latest guidelines, hotels and restaurants won’t be able to levy this charge on consumers by default.

What is a Service Charge?

A service charge is an additional levy to your total restaurant bill, which is intended to benefit those who served you there. This includes waiters, cleaners, cooks, and other support staff at the restaurant.

In 2017, the government mandated that customers were only obligated to pay menu prices of their orders plus government taxes on their dine-outs. Whether the customer wants to pay the service charge was entirely their choice. As such, making it a part of the bill, without the consumer’s explicit consent, was deemed unfair.

Restaurants and hotels resisted. Revenue from such charges forms a crucial part of their overall earnings. Calling it “legal” and a “matter of individual policy”, the default levying of service charges continued.

But last month, the government noted the skyrocketing number of customer complaints it had received on this matter in a meeting with the National Restaurant Association (NRA). These included forced payment of high service charges and harassment in case the consumers asked for it to be removed.

That’s why the new guidelines mandate:

  • Service charges will not be collected under any other name. Also, it will be marked distinctly from the food bill and GST on the bill.
  • The consumer must be informed that paying this charge is at their discretion.
    The restaurant will, in no way, force consumers to pay a service charge.
  • Restricting customer entry or their access to restaurant services will not be decided on the basis of this.

However, Danish, who covers food and lifestyle for a Delhi-based publication says most customers are embarrassed to get it removed.

“After all, it goes towards helping those who make our dining experience better. Most people pay it without a second thought, unless the service has been exceptionally bad. But at the end of the day, these are only add-ons,” he said.

Who Will be Impacted?

The on-ground hospitality staff like waiters, cooks, servers and more.

Indians, on average, eat out about seven times a month. On average, a waiter in India earns about Rs 16,500 per month. These service charges allowed them to take home some amount over and above their monthly salary.

Aman, who works at a well-known cafe in Nehru Place, Delhi, agrees. “I was able to make anywhere between Rs 5,000-7,000 per month, thanks to these charges,” he says.

India has a complex structure defining minimum wages. It depends extensively on the work zone i.e. rural or urban and whether the employee is skilled, semi-skilled, or unskilled. Waitressing is generally classified as semi-skilled labour, with minimum wages for this category set around Rs 17,000 in an urban area like Delhi.

Most restaurants describe it as a “bonus” for employee performance. This is because tipping culture isn’t prevalent in India like in the UK and US, where it is mandatory and forms a huge part of the server’s salary. The only respite for the staff can come from adequate compensation by their employers i.e. the restaurants and reduced reliance on such charges.

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first published:July 05, 2022, 15:34 IST
last updated:July 05, 2022, 15:36 IST