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Explained: The new guidelines against ‘service charge’, and what you can do if a restaurant adds it to your bill

The CCPA was established in July 2020 under The Consumer Protection Act, 2019, to promote, protect, and enforce the rights of consumers as a class, and to investigate, prosecute, and punish violators.

Written by Harikishan Sharma , Edited by Explained Desk | New Delhi |
Updated: July 7, 2022 11:23:26 am
The CCPA took cognizance of grievances regarding restaurants and hotels levying service charge by default, without first asking or informing consumers. (Express Photo: Praveen Khanna, File)

The Central Consumer Protection Authority (CCPA) on Monday issued guidelines to prevent unfair trade practices, and to protect the interest of consumers with regard to the levy of service charge in hotels and restaurants.

Under the guidelines, consumers can lodge complaints against hotels and restaurants by calling the number 1915.

The CCPA was established in July 2020 under The Consumer Protection Act, 2019, to promote, protect, and enforce the rights of consumers as a class, and to investigate, prosecute, and punish violators.

What do the CCPA’s guidelines on service charge say?

The CCPA has issued five major guidelines regarding the levy of service charge by restaurants and hotels, which has for long been a contentious issue and has periodically triggered complaints from consumers. The guidelines say:

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(i) No hotel or restaurant shall add service charge automatically or by default in the bill;

(ii) Service charge shall not be collected from consumers by any other name;

(iii) No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional, and at the consumer’s discretion;

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(iv) No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers; and

(v) Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount.

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What can a consumer do in case of a violation of these guidelines?

The consumer has four options at different levels of escalation in case she spots the levy of service charge in her bill.

First, she can make a request to the hotel or restaurant to remove the service charge from her bill.

Second, she can lodge a complaint on the National Consumer Helpline (NCH), which works as an alternative dispute redressal mechanism at the pre-litigation level. The complaint can be lodged by making a call on the number 1915, or on the NCH mobile app.

Third, the consumer can complain to the Consumer Commission, or through the edaakhil portal, http://www.edaakhil.nic.in.

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Fourth, she can submit a complaint to the District Collector of the concerned district for investigation and subsequent proceedings by the CCPA. A consumer can complain directly to the CCPA by sending an e-mail to com-ccpa@nic.in.

Why did the CCPA issue the guidelines?

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The CCPA took cognizance of grievances regarding restaurants and hotels levying service charge by default, without first asking or informing consumers.

On June 2, the Department of Consumer Affairs under the Ministry of Consumer Affairs, Food & Public Distribution, held a meeting with restaurant associations and consumer organisations on the levy of service charge in hotels and restaurants.

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After the meeting, the department announced that the Centre would soon release a “robust framework” to ensure strict compliance of its 2017 guidelines which prohibited the levy of service charge. A day later, Union Minister of Consumer Affairs, Food and Public Distribution Piyush Goyal said restaurants cannot ask customers to pay hidden charges.

“You (restaurants) can raise wages of your workers by raising rates. There is no bar on that. We would welcome it if they raise their employees’ wages. They are free to increase the wages of their employees and they are free to charge any rate,” Goyal told a press conference on June 3.

“Par chhal se chhupa hua ek rate, aur wo bhi kuchh charge karte hain kuchh nahin karte hain, to logon ko kaise maloom padega ki kya real price hai? (But they cannot levy a charge by deceit; and when some of them do so and the others don’t, how will people know what the real price is?),” Goyal said.

Under which law have these guidelines been issued?

The CCPA has issued guidelines under Section 18 (2) (I) of The Consumer Protection Act, 2019.

The guidelines are in addition to the Centre’s 2017 guidelines which prohibit the levy of service charge on consumers by hotels and restaurants, and terms the charging for anything other than “the prices displayed on the menu card along with the applicable taxes” without “express consent” of the customer as “unfair trade practices”.

What do restaurants and hotels say?

During the June 2 meeting, representatives of the hotel and restaurant industry told the Centre that the levy of service charge by a restaurant is a “matter of individual policy”. There is “no illegality in levying such a charge”, they said.

They also said that service charge brings in revenue to the government, since tax is paid on it.

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First published on: 04-07-2022 at 08:51:02 pm
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