Levying service charge not illegal, matter of individual policy: NRAI

“Information regarding the amount of service charge is mentioned/ displayed by restaurants on their menu cards and otherwise also displayed on the premises so that customers are well aware of this charge before availing the services,” NRAI said in a statement.

The industry body said it had provided its response to the government when this matter had come up in 2016-17.

National Restaurant Association of India (NRAI) on Tuesday said levying service charge is not illegal and is a matter of individual policy. The statement comes in response to the government’s move to convene a meeting with the industry body on June 2 as it feels this charge is being levied mandatorily on the consumers.

“Information regarding the amount of service charge is mentioned/ displayed by restaurants on their menu cards and otherwise also displayed on the premises so that customers are well aware of this charge before availing the services,” NRAI said in a statement.

It said once the customer is made aware of such a charge in advance and then decides to place the order, it becomes an agreement between the parties and is not an unfair trade practice. Also, goods and services tax is paid on service charge.

The industry body said it had provided its response to the government when this matter had come up in 2016-17. “There is nothing new which has been communicated by department of consumer affairs in its letter for the meeting on June 2, 2022,” it said.

In a written communication to NRAI recently, department of consumer affairs secretary Rohit Kumar Singh said restaurants and eateries are collecting service charge from consumers by default, even though the collection of any such charge is voluntary and at the discretion of consumers and not mandatory as per law. Consumers are forced to pay service charge, often fixed at arbitrarily high rates by restaurants, he said.

“Since this issue impacts consumers at large on a daily basis and has significant ramifications on the rights of consumers, the department construed it necessary to examine it with closer scrutiny and detail,” the communication said.

During the meeting, issues like restaurants making service charge compulsory, adding service charge to the bill under the guise of another fee or charge, not disclosing to consumers that paying service charge is optional and voluntary, and embarrassing them if they resist from paying service charge, would be discussed.

According to the official guidelines published in April 2017, the entry of a customer into a restaurant cannot itself be construed as consent to pay service charge. The guidelines further say that a customer placing an order amounts to his or her agreement to pay the prices displayed on the menu card along with the applicable taxes, and charging anything extra without the express consent of the customer would amount to an unfair trade practice.

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