Service Charge At Restaurants Was Never Compulsory; Know Where To Complain If You're Being Forced To Pay It

When we go to restaurants, many of us simply pay the “service charge” we are levied without a second thought.

There is a misconception here. As a customer, you are NOT required to pay any service charge at any restaurant. That is optional and you are well within your rights to deny that payment.

A restaurant can state that some amount of service charge has been levied; this amount can even be stated on the final bill; however the payment of this service charge is completely the customer’s call. Refusing to pay a service charge is legal; mandating a service charge is not.

This misconception has been exploited by restaurant chains for a long time, and it has gone relatively unnoticed owing to either the customers’ ignorance or the customers’ disinclination to create a scene.

However, in the past few days, many social media users have been sharing their restaurant bills to show how GST has impacted them. In some of these bills, it is clearly seen that the customer was charged a service charge in addition to GST. And many customers blindly paid this charge in addition to GST. This has resurfaced the need to educate the public about how they are regularly cheated by some restaurants.

What the rules say

Only two months ago, Food and Consumer Affairs Minister Ram Vilas Paswan reiterated that service charges in restaurants was voluntary and could not be made compulsory. Paswan also issued guidelines for states to take action.

Hotels/Restaurants should not decide how much Service Charge is to be paid by the customer &it should be left to the discretion of customer.

— Ram Vilas Paswan (@irvpaswan) April 21, 2017

Guidelines are being sent to states for necessary action at their ends.

— Ram Vilas Paswan (@irvpaswan) April 21, 2017

“The government has approved guidelines on service charge. As per the guidelines, service charge is totally voluntary and not mandatory now,” Paswan said in a tweet. “Hotels/restaurants should not decide how much service charge is to be paid by the customer and it should be left to the discretion of customer … Guidelines are being sent to states for necessary action at their ends.”

As per the guidelines, the column of service charge in a bill is to be left blank to 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.

An analysis of these guidelines can be read here.

Service charge and service tax

If you’ve had a meal at a restaurant recently, double check your receipt to make sure that you’ve not been swindled. Many restaurants and hotels have been charging customers excessively by billing them a service charge in addition to a service tax. They then try to convince the customer that it is part of the tax that goes to the government.

The Union Finance Ministry clarified on July 14 that service charge has absolutely nothing to do with service tax. And it does not go into the government coffers; instead, it ends up in the restaurant owner’s pocket.

The Logical Indian take

Many hotels cheat customers regularly with their “service charges”. Customers, out of ignorance or not wanting to create a scene, simply pay the service charge even if they’re not happy with the service.

Making these charges compulsory is illegal. Don’t let restaurant chains get away with cheating you when they charge you unnecessarily.

To take action against restaurants engaged in similar unlawful activity and to know more, visit the national Consumer Support Portal.

Also read: Hyderabad: Restaurant Fined Rs 5,000 For Taking Service Charge From Customer