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Consumers get a free hand on hotel service charge payout

Published On : 22 Apr 2017

New Delhi, (PTI) The government today approved new guidelines giving consumers the right to decide service charge they wish to voluntarily pay on a hotel or restaurant bill.

The guidelines, which have made service charge "totally voluntary and not mandatory", will be sent to states for necessary action, Food and Consumer Affairs Minister Ram Vilas Paswan said.

The norms, if implemented, will provide relief to customers who have to pay service charge up to 20 per cent on food bills in lieu of tips.

"The government has approved guidelines on service charge. As per the guidelines, service charge is totally voluntary and not mandatory now," the minister tweeted.

"Hotels and restaurants should not decide how much service charge is to be paid by the customer and it should be left to the discretion of the customer," he added.

"Guidelines are being sent to states for necessary action at their end," the minister said in another tweet.

As per the guidelines, the column of service charge in a bill will be left blank for customers to fill up before making the final payment.

"If there is mandatory levy of service charge, customers can file a complaint in the consumer court," a senior consumer affairs ministry official told PTI.

The current consumer protection law does not empower the ministry to go for hefty fines and stringent action against violations. However, the new Consumer Protection Bill under which an authority will be set up will have powers to take action, the official explained.

Last week, Paswan had said the ministry had prepared an advisory on the service charge issue and the same was sent to the PMO for approval.

"Service charge does not exist. It is being wrongly charged. We have prepared an advisory on this issue. We have sent it to the PMO for approval," Paswan had said.

A number of complaints from consumers have been received that hotels and restaurants were putting 'service charge' in the range of 5-20 per cent, in lieu of tips, the ministry had said earlier.

Reacting on the guidelines, the Hotel and Restaurant Association of Western India (HRAWI) said the service charge levying is a global practice and a legitimate tax.

"Service charge is a global practice and one that has been in force in India for more than half a century. The charge is neither hidden nor disguised. It is categorically and boldly mentioned in the menu," said Dilip Datwani, President, Hotel and Restaurant Association of Western India (HRAWI).

"A customer patronises a food outlet with the full knowledge that he or she will be levied a service charge. It is not just hospitality, but many businesses levy such charges. We cannot understand why we are being singled out," he added. "It is sad to see constant demands being made from the hospitality industry on one issue or the other. One day, it is reducing food portions and on another day, it is about terminating a legitimate charge.

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