Service charge has been made voluntary by the government and yet many people, some voluntarily and some unknowingly, have been paying service charge at restaurants and hotels.
Service charge has been made voluntary by the government and yet many people, some voluntarily and some unknowingly, have been paying service charge at restaurants and hotels. But the bigger problem is that many people think that restaurants collect the service charge but do not give it to their staff.
As service charge is an amount a customer can voluntarily pay for the services provided by staff and employees of a hotel or restaurant.
A survey by LocalCircles showed that 81% consumers believe that the service charge collected by restaurants is not fully paid to its staff is leading to the generation of black money. Many consumers complained that some restaurants continued forceful addition of service charge to the bills despite the advisories issued by the Department of Consumer Affairs to make service charge optional.
However, this week the Income Tax Department decided to examine the books of restaurants to see if there is any under-reporting or non-reporting of service charge collected by them.
The IT department swung into action after the commerce ministry informed that some restaurants were still charging service charge ‘compulsorily’, violating the guideline. The IT department also said that service charge collected by restaurants but not passed on to the staff will be liable for taxes under the income tax rules.
“35% consumers said that when they visited an air-conditioned restaurant in the last few months, the restaurants charged them a service charge flat out, while 8% said that the restaurant charged it, but they got it removed,” the survey said.