Levying service charges on customers 'not an unfair trade practice': NRAI

The National Restaurant Association of India (NRAI) on Tuesday stated that the levy of service charge by a restaurant is a matter of individual policy and there is no illegality in levying such a charge.

NRAI's statement comes a day after the Department of Consumer Affairs (DoCA) warned restaurants and eateries against collecting service charges from consumers by default.

Explaining further on the charges levied at such places, the restaurant body said that the information regarding the amount of service charge is mentioned/displayed by restaurants on their menu cards and otherwise also displayed on the premises so that customers are well aware of this charge before availing the services.

"Once the customer is made aware of such a charge in advance and then decides to place the order, it becomes an agreement between the parties and is not an unfair trade practice. GST is also paid on the said charge to the government," it added.

This matter had come up in 2016-17, and NRAI had provided its response to the government, it said.

Meanwhile, on Monday, the consumer affairs ministry said that it has called a meeting on June 2 with NRAI discuss about growing complaints that consumers. Consumer Affairs Secretary Rohit Kumar Singh wrote to NRAI President pointing out that restaurants and eateries are collecting service charges from consumers by default, even though the collection of any such charge is voluntary.

The Secretary has also pointed out in the letter that consumers are forced to pay a service charge, often fixed at arbitrarily high rates by restaurants.

Consumers are also being ''falsely misled'' on the legality of such charges and harassed by restaurants on making a request to remove such charges from the bill amount.

“Since this issue impacts consumers at large on a daily basis and has significant ramifications on the rights of consumers, the department construed it necessary to examine it with closer scrutiny and detail,'' the letter added.

The government also added that during the upcoming meeting, the ministry plans to discuss consumer complaints on the inclusion of service charges in the bill in the guise of some other fee or charge.

NRAI further mentioned that this matter had come up in 2016-17, and it had provided its response to the government. There is nothing new that has been communicated by the Department in its letter for the meeting on 2nd June 2022, it added.