We levy a 10 per cent service charge”. The words are as ubiquitous to a restaurant menu as spelling errors. The charge refers to the amount billed to customers which is directly distributed among employees of a dining establishment. “Every employee gets a share of the service charge from the dishwasher to the doorman to the chefs. When you visit a restaurant, your experience is ultimately facilitated by every staff member, not just the server who brings your food and so everyone has a right to it,” says Riyaaz Amlani, President of the NRAI (National Restaurant Association of India).
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However, when added to the three other taxes — excise, VAT and service tax — all of which are levied by state and central governments, the taxation causes much vexation to patrons, as it usually amounts to 18-25 per cent of the total bill.
Recently, in response to numerous consumer complaints, the central government issued an “advisory” stating that diners should pay service charge only if they feel satisfied with the service, and furthermore, are free to pay what they want. While this move was clearly meant to be a pick-me-up for the man on the street, it has caused consternation in the restaurant industry.
“The announcement is rather sudden. The service charge element was initiated as a practise to ensure that all front and back-end staff received equal due and was an incentive for quick and efficient service. It’s a standard practise, which cannot suddenly be termed ‘illegal’,” says Manu Chandra, Chef Partner, Toast & Tonic, The Fatty Bao and Monkey Bar, and Executive Chef Olive Beach, Bengaluru.
Indeed, because it is such standard practice the world over, restaurants themselves factor in the service charge when it comes to salaries; typically, restaurant employees earn up to half of their salary just through the service charge component. The F&B industry is one of the largest employers in the country, with around 5.8 million workers around the country. This “advisory” will have a detrimental effect on every employee. A waiter typically works a 12-hour shift with duties including cleaning and stacking crockery, laying tables to OCD standards, polishing silver and glassware, staying on their feet the whole day, all the while having to smile and serve and listen to you as you can decide between a whole-grain or raagi pasta. Chefs have it worse. The busboys, the dishwashers, the guards, even worse.
There is in fact a Supreme Court ruling, stating it’s the restaurant’s prerogative to levy a service charge on their customers, as long as they display it prominently and with the customers’ knowledge. “We’re confused about whether to follow the Supreme Court ruling, which is actual legislation, or the statement issued by the government, which they themselves classified as an advisory. So we are following the law, as laid down by the highest court in the land,” says Amlani, adding that at a time when there is such an emphasis being laid on transparency in transactions, the service charge system actually simplifies accounting. “When you slip your waiter a 100 rupees or more as a tip, that cash in unaccounted for. With the service charge component, everything is on paper and so, regulated.”