‘Consumer forum can’t decide plaints against service charge’

  • Nikhil Sharma, Hindustan Times, Chandigarh
  • Updated: Nov 14, 2015 12:12 IST

The district consumer disputes redressal forum, Chandigarh, has ruled that the complaints challenging levying of service charge by eateries are “not maintainable” in the consumer courts. This is despite the fact that in the past the consumer courts have fined some eateries based in the city for levying service charge on food items.

These observation came while dismissing the complaint filed by Navdeep Singh Nayyar, a resident of Hoshiarpur, who had moved the forum against levying of service charge by Chilis Grill and Bar, Elante mall, Chandigarh.

While dismissing the complaint, the consumer forum cited a Delhi high court order, which ruled that “restaurants/eateries can levy service charge on food items”.

Putting the confusion regarding the service charge to rest, consumer forum presided over by PL Ahuja held, “The restaurants/eateries can levy service charge and this consumer complaint for the refund of service charge and payment of compensation and litigation expenses is not maintainable before us”.

Nayyar, a resident of Manvata Nagar, Hoshiarpur, on July 5, 2015, along with his friend had visited Chilis Grill and Bar for having meals. The food cost was ‘1,075 and he was asked to pay ‘107.50 as service charge, which, according to Nayyar, was in ‘violation’ of the Chandigarh administration order.

Justifying charging service charge, Chilis Grill said, “Service charge is a nominal fee collected from the customers for the betterment of the establishment and employees thereof and is not chargeable in the form of a statutory tax”.

Service charge conundrum

The tax department plans to issue guidelines for eateries to curb arbitrary imposition of service charge months after the govt clarified that it is not collected by the government.

By means of these guidelines, the government is trying to rectify the arbitrary and incorrect ways in which restaurants calculate their service charges


Service charge is nothing but an organised and enforced way to collect tips for waiters and support staff

The bill that you get at a restaurant has several components and includes two major taxes — service tax and value added tax (VAT)

Service tax, a central government levy, is to be charged at the rate of 14% on 40% of the food bill or 5.6% on the total food bill

VAT, a state govt levy, is imposed on the sale of goods. VAT on food and beverages vary state to state and restaurant to restaurant

Conflicting orders

July 2015: The UT consumer disputes redressal forum had directed Nando’s (Sukhmani Enterprises) in Elante mall to pay Rs 7,000 as compensation and Rs 5,000 towards the litigation cost for illegally levying Rs 137.55 service charge on a food bill.

August 2015: The Chandigarh district consumer disputes redressal forum had directed Sector 26-based Barbeque Nation Hospitality Limited to pay Rs 10,000 as compensation to the complainant, Sector 27-resident Vikas Kuthiala, for levying Rs 197 as service charge.

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