India's restaurant body calls service charge guidelines illegal

A day after the Central Consumer Protection Authority (CCPA) prohibited restaurants from unilaterally levying service charges on customers, the restaurant owners have lashed back. Questioning the legality of the CCPA guidelines that prohibits restaurants from levying service charge, the National Restaurant Association of India (NRAI) has alleged that it has only led to disruption in business activities.

“The latest guidelines issued by CCPA has once again created unnecessary confusion amongst the consumers, leading to disruption in smooth business operations of restaurants. Through these repeated guidelines, there is an attempt to start a campaign against this restaurant industry practice without any legal basis”, it said in a statement.

Tearing into the government’s claims that customers are being duped by restaurants by levying services charges without informing them that these charges are optional, the NRAI further argued that service charge “constitutes one of the components of the total price of the product” and, thus, cannot be optional. It also said, that government does not have any authority to interfere in the matter.

“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….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”, it said today.

According to NRAI, since voluntary service charges paid by customers are “pocketed” by the front-end employee who has directly served the customers, the back-end employees lose out on any share from it. Thus, it is “the owner's discretion as to how to run its business and what policy should be put in place regarding pricing of the product. The government cannot bring about a change insofar as a levy of service charge is concerned by making guidelines”, the NRAI said.

The restaurant owners’ response came after the CCPA, under the Ministry of Consumer Affairs, issued guidelines against restaurants that adds service charges unilaterally in bills. According to CCPA, the customer should have the choice of paying or not paying any service charges depending on the quality of service paid by the restaurant.

“Hotels, restaurants can’t force customers to pay service charge; it will be voluntary option at customers discretion. Service charge in hotel/restaurant bill cannot be collected from customers by any other name; can’t be added to food bill”, it said. In case of violation, consumers can lodge complaint on National Consumer Helpline number 1915 against the concerned hotel or restaurant.