Centre says service charge levied by restaurants is illegal

Published on Jun 02, 2022 06:49 PM IST
Consumer affairs secretary Rohit Kumar Singh in a letter to the NRAI president had pointed out that restaurants and eateries were collecting service charge from consumers by default, even though such collection is voluntary.
Restaurants normally charge somewhere between five to 10% as service charges. (HT Photo)
Restaurants normally charge somewhere between five to 10% as service charges. (HT Photo)
By | Written by Aryan Prakash | Edited by Chandrashekar Srinivasan

Service charges levied by restaurants are illegal, the Centre said Thursday and asked the National Restaurant Association of India (NRAI) to end practice immediately. The decision was taken at a meeting between the consumer affairs ministry and the NRAI on discussions over complaints by consumers being forced to pay service charges. The ministry had taken notice of a number of media reports and the grievances registered by consumers on the National Consumer Helpline, news agency PTI had reported.

Consumer affairs secretary Rohit Kumar Singh in a letter to the NRAI president had pointed out that restaurants and eateries were collecting service charge from consumers by default, even though such collection is voluntary.

The secretary had pointed out that consumers were being forced to pay service charge often fixed at arbitrarily high rates by restaurants. The secretary added consumers were being ‘falsely misled’ on the legal standing of such charges and harassed by restaurants when they asked for these to be removed from the bill.

“Since this issue impacts consumers at large on a daily basis and has significant ramification on the rights of consumers, the department construed it necessary to examine it with closer scrutiny and detail," PTI quoted the letter.

In April 2017, the ministry had issued guidelines on the levy of service charge by hotels/restaurants.

The guidelines noted that entry of a customer to a restaurant cannot be itself construed as a consent to pay service charge.

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