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Restaurants miffed by the CCPA service charge guidelines, NRAI says they have no legal standing

Meanwhile, the Federation of Hotel & Restaurant Associations of India (FHRAI), another industry body, also came out with a sharp response.

service charge, service charge hotels, service charge NRAI" "Service charge is a part of the owner’s discretion/decision regarding the total price payable by a customer with regards to sale or service of a product," the statement said. (Photo: Abhinav Saha)

Responding to the strict guidelines issued by Central Consumer Protection Authority (CCPA) on Monday against the levy of service charge, restaurateurs have said that the move has created unnecessary confusion among the consumers, leading to disruption in smooth business operation at restaurants.

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“Through these repeated guidelines, there is an attempt to start a campaign against this practice without any legal basis. It is also relevant to state that extra charges are being levied by many other Industries, including some government agencies. However, the guidelines are issued only for the restaurant industry,” said a statement issued by the National Restaurant Association of India (NRAI) on Wednesday.

“Service charge is a part of the owner’s discretion/decision regarding the total price payable by a customer with regards to sale or service of a product. It constitutes one of the components of the total price of the product. Neither the government nor any authority can interfere with the decision of the business owner in this regard. It is a universally accepted trade practice,” the strongly-worded statement said.

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They also insisted that customers are made aware of the pricing and its components before they place an order for the product. Once the customer places the order after being made aware of the terms and conditions, there comes into existence a binding contract. “No authority can interfere with binding nature of a valid contract until and unless it is shown and proved to be unconscionable or against any unfair trade practice,” the industry body stated.

Meanwhile, the Federation of Hotel & Restaurant Associations of India (FHRAI), another industry body, also came out with a sharp response. “Most of these guidelines are already followed by hotels and restaurants. It’s extremely disheartening that the hospitality industry is constantly singled out,” said Gurbaxish Singh Kohli, Vice President, FHRAI.

He added, “We have explained over and over again that there is nothing illegal in collecting a service charge… But the industry is being painted as the black sheep in the eyes of the consumer for no reason. Ironically, there are several online websites and apps that charge convenience fee including the Government-run IRCTC. These do not even explain what the charge is for nor is the consumer given a choice to opt out of it. We ask the Government to introduce a law that is uniform to all businesses.”

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NRAI statement also said that the legality, reasonableness or justification of levying service charge has been considered by the Supreme Court of India, High Courts, National Consumer Disputes Redressal Commission, erstwhile Monopolies and Restrictive Trade Practices Commission and by the Income Tax Authorities (ITAT). The levy of service charge has been upheld in various judicial pronouncements in the past.

The FHRAI plans to approach the CCPA seeking clarifications and to submit further suggestions.

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First published on: 07-07-2022 at 09:10:55 am
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