Hotels barred from levying service charge by default

Hotels barred from levying service charge by default

July 5, 2022

New Delhi: The Central Consumer Protection Authority (CCPA) has barred hotels and restaurants from levying service charges automatically or by default on food bills. Further, consumers cannot be forced to pay this charge as it is voluntary and optional, and it shall not be collected by any other name either.

It allowed customers to file complaints in case of violation with the Consumer Commissions, including through the ‘e-daakhil’ portal, and even Deputy Commissioners. National Consumer Helpline (NCH) number 1915 can be called for speedy redressal. Complaints can also be filed on NCH mobile application.

The Authority, set up under the Consumer Protection Act, has issued detailed guidelines specifying the duties of eateries and the rights of customers. The CCPA also said hotels and restaurants must not link the entry of a customer and consumption of food to the service charge. Customers must be informed that any such payment is at their discretion.

The Authority has said the service component is inherent in the price of food, which covers both the material and service. “There is no restriction on hotels or restaurants to set the prices at which they want to offer food or beverages to customers. Thus placing an order involves consent to pay the prices of food items displayed on the menu along with applicable taxes. Charging anything other than the said amount would amount to unfair trade practice under the Act,” said the guidelines.

Restaurants said it was not an illegal charge and a matter of restaurant policy. The Ministry, on the other hand, was of the opinion that this charge was a default billing option in spite of the fact that it was not mandated to be collected by law.

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Further, many people did not know that service charge was completely voluntary, and a ‘tip’ levied by restaurant – and different from service tax – was a compulsory tax to be paid on every order.


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