In the previous week, the ministry of consumer affairs asked restaurants to stop the practice of collecting service charges from customers “by default” as it “does not have legal sanction.”
The ministry held a meeting with the National Restaurant Association of India (NRAI) on June 2, following complaints from consumers regarding the service charge. Issues relating to service charges levied by restaurants were discussed in the meeting. The levy varies from 5-10% of the food bill.
According to official sources, the ministry has also stated in a meeting with the restaurant owners that, the practice of levying service charges will be expressly prohibited soon. This would be done through an amendment to the Consumer Protection Act, 2019.
Opposing this move, the NRAI which states to represent over 0.5 million restaurants, said, “There is no illegality in levying service charge on customers,” who decide to pay it. “It is a matter of individual choice,” it said, adding to the information that, restaurants clearly display information about the amount of service charge levied on their menu cards and on the premises.
Piyush Goyal, who is in charge of commerce and industry along with food and consumer affairs ministries, dismissed the claim of restaurants removing the service charge would cause them to lose money.
Goyal also stated that restaurant owners are free to increase the rates on their food menu if they wanted to pay higher salaries to their employees.
“We have not stopped restaurants from increasing their prices. It will be wrong for restaurants to say that they will suffer losses if the service charge is withdrawn,” he stated during a press conference on Friday. People will not know the real price, if there is a hidden cost, he stated, adding: “We cannot mislead people by charging for service.”
