Service charge imbroglio should be resolved soon

New Delhi: The Union ministry of consumer affairs is under pressure from consumers to bring a law to scrap the service charge being forcibly imposed by the hospitality industry and thereby end a vexatious issue hanging fire for more than a decade

New Delhi: The Union ministry of consumer affairs is under pressure from consumers to bring a law to scrap the service charge being forcibly imposed by the hospitality industry and thereby end a vexatious issue hanging fire for more than a decade.

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This pernicious practice which has crept into the Indian scene via the United Kingdom and other nations, has been agitating consumers for long. Serving the customer is central to the hospitality business and the bill that is presented to a customer incorporates all expenditure , including the food, overheads, the profit margin and the cost of serving the consumer. Yet, the industry has been forcing consumers to pay an additional, pre-determined, unfair, illegal levy, in the form of ‘service charge’ added to the bill, claiming it to be in lieu of the tip or gratuity that the consumers earlier paid at their pleasure, depending on the service.

In response to increasing consumer complaints , the ministry last month called a meeting of all stakeholders. While consumers wanted the ministry to put a stop to the practice, the industry continued to maintain that there was nothing illegal or unfair in the levy.

In 2017, the ministry had taken cognizance of consumer resentment and anger over the charge and issued detailed guidelines clarifying that the hospitality industry cannot convert a voluntary gratuity into a compulsory levy and force consumers to pay. Since it was only a guideline and did not have the force of the law, the industry did not heed the ministry’s advice. The guidelines also described such practice as an unfair trade practice and a restrictive trade practice and said consumers could use the consumer courts for redress.

Many consumers have followed that advice and recovered through the consumer courts, the service charge paid and also got compensation and costs of litigation. In Punjab Grill Restaurant Vs Shri Jai Jeet Singh, for example, the Maharashtra State Consumer Disputes Redressal Commission upheld in July 2018, the compensation of ₹5000 and costs of an equal amount plus refund of the service charge awarded by the District Commission in Mumbai to the consumer, an IPS officer, who was forced by the restaurant to pay service charge. In Arkadeep Sarkar Vs Yauatcha, the Kolkata District Consumer Commission II (Central) in January this year directed the restaurant to return to the consumer, the service charge levied and also pay ₹10,000 as compensation and ₹3000 as costs. Similarly in G.Thabre Alam Vs Buhari Hotel, the Chennai District Commission (South ) in January 2019 awarded ₹10,000 as compensation, ₹5000 as costs and directed the eatery to pay back the service charge

Thus many consumers have taken up the cudgels against restaurants forcing them to pay the service charge, but that has not deterred the eateries, who are actually challenging the consumers and saying that they need not patronise them if they did not want to pay the service charge. So there is an urgent need for the consumer affairs ministry to intervene quickly and protect consumers , who, as a class, have paid millions of rupees that they did not owe, to the hospitality sector. In fact consumer justice demands that this amount be recovered from restaurants and hotels that imposed this levy and put into the Consumer Welfare Fund.

But first and foremost, since the imposition of service charge and some of the practices associated with it come under the definition of ‘unfair contract’ as well as ‘restrictive trade practice’ and ‘ unfair trade practice’ under the Consumer Protection Act of 2019 , the Central Consumer Protection Authority constituted under the Act should take up such cases suo motu and order discontinuance of such practices that are unfair and prejudicial to consumer interest. And whoever fails to comply with the direction of the authority on these issues are liable to be punished with imprisonment for a term that may extend to six months or a fine of ₹20 lakhs or both. The central authority can also make regulations for giving effect to the provisions of the act.

The act also empowers the central government to make rules for carrying out the provisions of the act and this includes rules pertaining to the manner of issuing bills for services rendered or goods sold. And not issuing bills in such a manner as may be prescribed constitutes an unfair trade practice. So the consumer affairs ministry is today better armed to deal with the issue and one hopes that consumers will get the much needed relief soon.