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Paying service charge is consumer's choice: govt

The Union government on Monday said that ‘service charge’ on food bills is not compulsory and that the consumer has the option of not paying it if s/he is not satisfied with the service. In a notification, the Department of Consumer Affairs (DCA) asked the states to “advise the hotels and restaurants” to disseminate this information through displays on their premises.

The move—coming in the wake of a slew of complaints on customers being levied a mandatory ‘service charge’ in the range of 5-20 per cent of the bill amount—is likely to lead to squabble between customers and restaurant staff.

The restaurant industry players maintain that it is a matter of policy for restaurants to decide if service charge is to be levied or not. Besides, there are specific guidelines laid down by the National Restaurant Association of India (NRAI) requiring hotels and restaurants to make up front disclosure (about levy of service charge) across their outlets.

Elaborating on the guidelines, Riyaaz Amlani, president, NRAI, said, “Information regarding amount of service charge is to be clearly mentioned/displayed by restaurants on their menu cards…so that customers are well aware of this charge before availing the services and can use their discretion of not using the facility offered by the restaurant.”

NRAI had also issued a circular last month giving its take on the service charge issue saying that inclusion of service charge in a restaurant bill is a common and accepted practice.

An industry standard by most fine dining restaurants across the country, service charge is levied in lieu of tips that eventually gets distributed among restaurant employees as part of their variable pay. Restaurateurs also use it as employee retention tool and control staff attrition. In fact, people joining service in restaurants always look at the combined package i.e. salary (fixed component) plus tips (variable pay that comes from distribution of service charge collected from the customers).

At Sanjeev Kapoor Restaurants (SKR) Pvt Ltd that operates 50 outlets across India under brands like The Yellow Chilli, Hong Kong, Suravie and Grain Of Salt, the service charge levied is six per cent. According to Rajeev Matta, chief executive officer, SKR, “There are some restaurants that don’t charge anything at all, there are others who will charge anything up to 10 per cent. There could be a few charging more than 10 per cent too. Any guest walking into the restaurant is informed (about levy of service charge) through the menu and other display material inside the premises.”

On reports about not paying service charge if the customer is unhappy with the service, a restaurateur quipped, who decides if the service was satisfactory or not? “Are we happy with the condition of the roads, water supply, power, hospitals, schools, government offices etc? But then, are we allowed to pay government taxes at our discretion,” he asked.

As for putting an end to the service charge debate that springs up every now and then, the restaurateur fraternity is of the view that the government should either scrap service charge terming it illegal or let it continue the way it is. “There is no point succumbing to pressure groups or social media campaigns,” said a senior executive of a fine dine restaurant chain.

“Besides, if scrapped, restaurant owners will be left with no option but to increase the menu rates.”