July 7, 2022 - 5:04 am

Service Charge To Be Removed From Hotels & Restaurant Bills

New Guidelines Issued by CCPA

The Central Consumer Protection Authority (CCPA) has issued fresh guidelines preventing restaurants & hotels from levying service charge on customers after taking cognizance of the complaints lodged by resentful consumers over hotels & restaurants levying service charge by default – without first informing or asking the consumers. If a service charge is added to the bill, customers may file a complaint. Complaints can be filed with the District Collector too or with the Consumer Commission. Along with this, a big change has been introduced putting a notice outside the hotel informing about the service charge, so that customers can’t be refrained from entry.  Further, consumers cannot be compelled or forced to pay this charge as it is optional & voluntary, and it shall not be collected by any other name either.

Order Issued Under Section 18 (2) (I) 

 The order has been issued under Section 18 (2) (I) of The Consumer Protection Act, 2019, in addition to the guidelines issued in 2017 by the Ministry of Consumer Affairs, Food & Public Distribution. The 2017 guidelines term the charging for anything other than “the prices displayed on the menu card along with the applicable taxes” without “express consent” of the customer as “unfair trade practices”, effectively prohibiting levying service charges. 

Long Debate Came to an End

 Since 2017, The service charge debate had been continuing. Restaurants emphasize that it was not an illegal charge & a matter of restaurant policy. On the other hand, the Ministry was of the view that this charge was a default billing option even though it was not mandated to be collected by law. Further, many people unaware about the service charge which was completely voluntary, & a 'tip' levied by the restaurant - and different from service tax which was a compulsory tax to be paid on every order.

No Restriction on Restaurants / Hotels on Setting Price

The Ministry said the National Consumer Helpline (NCH) has received several complaints by consumers against levying of service charge. Further, the guidelines added that component of service is inherent in price of beverages & food offered by the hotel or restaurant. Pricing of the product thus covers both the goods & services component. There is no restriction on restaurants or hotels to set the prices at which they want to offer beverages or food to consumers. Thus, consent is required while placing an order to pay the prices of food items displayed in the menu along with applicable taxes. Under the Act, charging anything other than the said amount will amount to unfair trade practice.

Toll Free Aids for Complaints

 In case of any consumer figures out  that service charge  is still being levied, a request can be raised to be remove service charge or else an aggrieved consumer can file a complaint. For speedy redressal, the National Consumer Helpline (NCH) number 1915 can be called. Complaints can also be registered on e-daakhil portal or the NCH mobile application. In a bid to protect consumers from unfair charges, restaurants & hotels can’t any longer levy service charge by default automatically or in the food bill. Complaints can also be lodged by sending an email to & through WhatsApp, SMS.

Govt. Meeting Held on June 2

  The government on June 2, held a meeting with representatives of associations of restaurants as well as consumers.  even as restaurant associations claim the practice is legal, the consumers affairs department thinks that levying service charge adversely affects the rights of the consumers, & it is an “unfair trade practice". It asked the National Restaurant Association of India (NRAI), which represents more than half a million restaurants, to immediately stop the practice. The Department of Consumer Affairs (DoCA) will soon come up with a robust framework to ensure strict compliance by the stakeholders about service charge levied by hotels & restaurants as it adversely affects consumers daily.

Consumers Welcome the New Step

 The prohibition of practice of adding service charge by increasing the rates of food items is a welcome step. This effectively ends the long-standing debate of whether restaurants and hotels can levy service charges. Good guidelines by Ministry are the need of the hour. It's so embarrassing to get the service charge removed in a restaurant when the service is not good at all. Just because service charge is now banned, hope we’ll continue service with a smile?

Questions and Answers Questions and Answers

Question : What are the new guidelines issued by CCPA regarding service charges?
Answers : The new guidelines issued by CCPA state that restaurants & hotels are not allowed to levy service charges on customers without first informing or asking the customers. If a service charge is added to the bill, customers may file a complaint.
Question : What is the order issued under Section 18 (2) (I) of The Consumer Protection Act, 2019?
Answers : The order prohibits levying service charges without the express consent of the customer.
Question : What is the service charge?
Answers : The service charge is an optional fee that you can pay when you stay at a hotel. It's usually about 10% of the room rate.
Question : What is the difference between service charge and service tax?
Answers : Service charge is a voluntary payment that restaurants and hotels can levy on their customers, while service tax is a compulsory tax that restaurants and hotels must pay on every order.
Question : What is the name of the Act that outlines the requirements for pricing food items in India?
Answers : The Consumer Protection Act, 1986.
Question : What is the National Consumer Helpline (NCH)?
Answers : The National Consumer Helpline (NCH) is a toll-free, 24x7, consumer helpline that provides redressal of consumer grievances.
Question : Can I get a refund for the service charge that I have already paid?
Answers : No, service charge is not refundable.