Hotels continue to levy service charge

GOVERNMENT’S JAN 2 DIRECTIVE HAD ASKED RESTAURANTS ACROSS THE COUNTRY TO MAKE SERVICE CHARGE A VOLUNTARY OPTION

Many restaurants across the country continue to levy service charge from their customers despite the government’s January 2 directive asking them to make it a voluntary option.

In order to ensure its strict implementation, the state governments were required to issue a notification, which many have failed to comply with. Sources said that the Centre merely passed a guideline that has no legal validity.

Consumer activists are set to push for the early passage of the new consumer protection bill, which envisages a consumer protection authority that will help speed up consumers grievance redressal process much like the practice followed in the US and many European countries.

“We are hoping that the bill is taken up in the current session of Parliament so that the issue can be resolved at the earliest,” Bejon Misra, consumer policy expert and founder, Consumer Online Foundation told HT.

The new bill once approved will repeal the 30-year-old archaic Consumer Protection Act. The regulatory authority will also have the power to recall products, cancel licences of entities, if required, and initiate class action suits.

“There has no statutory framework to ensure that service charge is made optional for customers. Besides, transparency needs to be brought in and the money that is coming in as service charge must be distributed fairly,” Pushpa Girimaji, consumer policy expert said.

Earlier, the consumer affairs ministry in its guideline mentioned that people have the right to decide whether or not to pay the charge depending on their satisfaction.

The guidelines also mentioned that they could also decide on the quantum.

Restaurants and hotels had been directed to put up notices at “appropriate” places on their premises announcing that “service charge is discretionary”.

Many restaurants, on the contrary, have put up boards, which clearly state that service charge will be levied from customers.

There is no directive from tax authorities on the service charge, which could vary anywhere between 5% and 20% of the billed amount.

“With the current framework, one cannot do much as the onus is on the state governments and restaurant owners are taking advantage of the legal loopholes,” Misra added.

Sources also said many restaurants, which have decided not to levy the charge upfront, have revised their rates for the dishes displayed on their menu. While the establishments are supposed to pass on the service charge amount to waiters and other staff, it often does not happen.