Government approves Guidelines on service charge

Ministry of Food and Consumer Affairs has approved the ‘Guidelines on Fair Trade Practices Related to Charging of Service Charge from Consumers by Hotels and Restaurants’. As a part of the guidelines which has been issued in public interest to protect the rights of consumers, the government has said that Service charge on hotel and restaurant bills is “totally voluntary”, adding that mandatory levy of service charge amounts to unfair trade practice.
As per the guidelines, Hotels and restaurants cannot decide on service charge and the column of service charge will be left blank in the bill for the customers to fill up before making payment.
The guidelines have also stated that in a case of mandatory levy of service charge, customers can file a complaint in the Consumer Court. However, at present, stringent action cannot be taken against the erring hotels as the current Consumer Protection Act, 1986 does not empower the ministry to do so. But, under the new Consumer Protection Bill, an authority is expected to be set up with powers to take such actions.

Rationale

Department of Consumer Affairs has justified the guidelines in view of complaints received by it from consumers that some hotels are insisting payment of service charge in the range of 5-20 per cent and many people are paying it believing that it is part of taxes.
As per the guidelines, a component of service is already inherent in the provision of food and beverages ordered by a customer. Hence, the price of food and beverages is expected to cover both goods and service components.

HRAWI’s Response

The Hotel and Restaurant Association of Western India (HRAWI) has not welcomed the guidelines by saying that levying of service charge is a global practice and a legitimate tax, adding that it has been in India for more than half a century. It has accused the government of singling out the sector as hospitality sector and several businesses are levying such charges.

Month: Current Affairs - April, 2017