‘Service charge was always discretionary’: Restaurants weigh in before meeting with Centre

The meeting comes days after Consumer Affairs secretary Rohit Kumar Singh wrote to NRAI, saying restaurants are collecting service charges from consumers by default, even though its collection is voluntary and at the discretion of consumers and not mandatory as per law.

Kabir Suri, co-founder and director, Azure Hospitality, and president of NRAI, told The Indian Express they have received the communication from the ministry and are deliberating on a formal response. He said, “The service charge was always discretionary, the menu of all restaurants mentions it clearly. This is what we are going to tell them at the June 2 meeting.”

Suri added, “A major chunk of the service charge goes directly to the staff, while the rest goes towards a welfare fund to help them during good and bad times. It’s a default billing option, even as customers can choose not to pay if they don’t want to.”

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Sharad Madan, owner & co-founder of Khubani restaurant at Delhi’s Aerocity, said, “Service charge is for the staff on the floor who work really hard for customer satisfaction and deserve the tip as a token of appreciation. They are paid salaries but the service charge works as an incentive, so we are looking forward to this meeting.”

Suri said, “Patrons can decide not to pay and tip the server directly, but in this case, backroom staff doesn’t get anything. A service charge ensures all staff members are rewarded evenly. If a customer wants it waived off, he/ she can talk to the management and tell them where they lacked in the service area.”

Amit Bagga, CEO and co-founder of Daryaganj restaurants in the capital, added, “It’s an important source of extra earning for our staff; half of the service charge goes to them and the rest covers up for extras and issues that we might face. It is clearly mentioned in the menu. Still, if someone doesn’t want to pay for it, they can request for it to be removed.”

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Former NRAI president Anurag Katriar, the founder of Indigo Hospitality, said, “I think it’s a settled issue. As long as we inform patrons well in advance of charges we levy and they still choose to avail the services, there is nothing improper. So is the case with service charges. In fact, GST is also levied on this charge which we collect and pay entirely to the government.”

Katriar added, “Service charge is neither a hidden charge nor variable based on your service experience. It is contractual similar to a convenience charge levied for online bookings for air tickets, movie tickets etc. I am certain NRAI will put forward these views and rationale to the department and they will understand our stand.”