To pay or not to pay a service charge when you eat out?

Last weekend, when I went out for dining in Noida, most restaurants had a big printed sign stuck to their doors. The signs read: “We levy service charge of 10%,” or something along the same lines. It came at a time when the government was going strong against restaurants and diners levying hidden service charges.

And finally, on July 5, 2022, the Indian government announced that restaurants cannot levy service charges by default. It clarified that tipping or paying service charges will be up to the discretion of the customers. 

The Central Consumer Protection Authority (CCPA) issued guidelines to hotels and restaurants telling them that they cannot add service charge automatically or by default to the food bill. 

Here are the guidelines issued: 

1. Entry of customers doesn’t mean that they are consenting to pay service charge.
2. Service charge cannot be automatically added to food bill.
3. Customers have all the rights to ask the hotel or restaurant to remove service charge from their bill.
4. Collection of service charge cannot be done under any other name.
5. To pay or not to pay service charge will depend entirely upon the customers.

What can you do if a restaurant forces you to pay service charge? 

1. Lodge a complaint by calling the National Consumer Helpline number 1915 
2. Lodge a complaint through the NCH mobile app
3. Send an SMS to 8130009809
4. Complain on the E-Daakhil portal 
5. Send a mail at com-ccpa@nic.in

What do restaurants have to say? 

Hotel and restaurant associations have rallied against the diktat of the government. They argue that levying a service charge is completely legal and needed to pay the employees. They also said that hoteliers pay a tax to the government on the service charge. 

Diners say that the prices given on the menu are for the products they offer and the service charge needs to be paid for the service availed at the restaurant. 

On the other hand, the government has asked restaurants to not arbitrarily charge customers a service charge. The government also says that hoteliers are free to raise the prices of their products, in case they want to pay their employees better. 

Does it benefit the customer? That's the million-dollar question. While it means customers will be exempt from the so-called 'mandatory' service charges, it could also mean restaurants charging higher prices for the food in the first place. But nonetheless, for the customer who was asked to pay Rs 70 for a Rs 20 tea by the Indian Railways, the check seems to be necessary. 

Passenger pays Rs 70 for a cup of tea during train journey. Indian Railways explains why? pic.twitter.com/uEdOEiSQwf

— சாம் (இறை மொழியனார்) (@Sam_kanyakumari) July 3, 2022

Can restaurants make service charges clear for customers before entering?

Like in the case of restaurants sticking a poster of their service charge on their doors, the new guidelines also state that customers cannot be refused entry if they disagree with the arrangement. 

Usually, a service charge of 5-13% is levied in restaurants. In India, service charge is largely considered similar to tipping the staff for their services. At times, some customers also give a tip on top of the service charge levied. 

In India, tipping isn’t customary, as it is in western countries, where patrons are expected to tip their waiters at least 10% of the food bill. 

The debate has been going on since 2017 when the government made it clear that there is no such thing as a ‘mandatory’ service charge, and any service charge is at the discretion of the customers. The new guidelines are once again a reminder of the same. Whether it will really change the attitude of the hoteliers or not, needs to be seen.