Can you say no to restaurant service charge? Here's what the rule says

Eating in a restaurant is getting expensive, partly because of the rising LPG, edible oil and raw material prices. But if you look at the restaurant bill carefully, then you will notice that service charge is also included, which further increases the bill amount.

The Union Ministry of Consumer Affairs on Thursday termed the service charge levied by the restaurant as illegal. It has asked the National Restaurant Association of India (NRAI) to stop it immediately. The ministry said that the levying of service charge is adversely affecting the consumers. 

Read | Customers cannot be forced into paying ‘service charge’, Centre warns restaurants

What is service charge?

Service charge is used by restaurants/hotels to pay the staff and workers and is not charged for the experience or food served to consumer. Staff are paid the salaries but the service charge works as an incentive for them, restaurants' insist. The restaurant adds service charge to the bill amount to be paid by a customer after eating food. 

It is added to the bill, though a customers can choose not to pay it if they don't want to. A restaurant bill comprises food charge, with an addition of service charge (between 5 to 15%) and a 5% GST on this amount. This is for all kinds of standalone restaurants. The GST is 18% in case the restaurant is located inside a hotel, mostly five-stars.  

Mostly restaurants decide the service charge on their own, while the GST is a mandatory component. Service charge is like a gratuity or a tip.

Government to come up with legal framework

Consumer Affairs Secretary Rohit Kumar Singh said that the government will soon come up with a legal framework to stop restaurants charging service charges from customers. He said this after a meeting with representatives of restaurant and consumer associations.

Rohit Singh said that the restaurant and hotel industry associations claim that this practice is not legally wrong. On the other hand, the Department of Consumer Affairs is of the view that it adversely affects the rights of the customers. Also it is 'unfair trade practice'.

NRAI meet with Ministry of Consumer Affairs

Following consumer complaints, the ministry had scheduled a meeting with the National Restaurant Association of India on June 2. Issues related to the service charge levied by the restaurants were discussed in the meeting held on Thursday. Restaurants usually charge a service charge of 10% on the total bill.

The Ministry of Consumer Affairs, in a statement calling the meeting recently, had said, "With a view to take note of several media reports by the Department of Consumer Affairs (DoCA) as well as complaints lodged by consumers on the National Consumer Helpline (NCH) the meeting is being held."