The Chandigarh administration has declared service charge as illegal and has directed all the hotels/restaurants not to levy service charge on the customers failing legal action will be taken against them.
As per the rules of ministry of consumer affairs, service charge cannot be levied on food served at the table.
Throwing norms to the wind, the restaurants have been fleecing consumers by charging money ranging from 6% to 12% on the bill.
By the illegal illegally levy service charges, the restaurants are putting additional burden on consumers, who already have to pay around 25% taxes in form of value-added tax (VAT) at the rate of 12.5%, service tax and luxury tax at the rate of 4.85% and 7.42%, respectively.
According to excise department, service charge is not a government levy and is collected by the restaurants themselves.
As per excise department officials, the multifarious taxes and other charges unnecessarily inflate the foods bills and there is lot of resentment among the public particularly with regard to service charges.
The decision has been taken following issue taken up by city-based social activist Ajay Jagga with administration.
“The authorities should ensure that the directions are complied in toto and proper check in kept on all the hotels and restaurants and this order is complied with,” said Jagga.
Interestingly, following the directions from the ministry of consumer affairs, the administration had declared the practice illegal in 2006.
However, with no check in place, several restaurants continued to indulge in the malpractice under the nose of the administration and the practice showed no sign of abating.