NEW DELHI: In an order issued on Monday, the Central Consumer Protection Authority (CCPA) under the Ministry of Consumer Affairs (MoCA) said that "no hotels or restaurants shall add service charge automatically or by default in the bill.”
The controversy over abolishing the service charge has been brewing for over a month now, with the National Restaurants Association of India (NRAI) last month taking exception to the Department of Consumer Affairs' (DoCA) proposal to do away with the service charge. According to the NRAI, levy of service charge was very much legal.
Warning restaurants and hotels against forcing customers to pay service charge, the CCPA said that "no restriction on entry or provision of services based on collection of service charge shall be imposed on consumers." In case of non compliance with the order, consumers can lodge a complaint with the National Consumer Helpline — by calling 1915 — or file a complaint with the Consumer Commission.
Historically, the service charge was introduced in lieu of tips, which had become a way to augment the income of the food and beverage (F&B) service staff such as stewards and chefs, who were traditionally paid extremely low salaries.
In fact, tip collection — or later the service charge collection, which was distributed in proportion, according to rank — was much higher than the salary earned by the staff, usually upto the supervisory level as many F&B outlets excluded managerial staff from the share of tips or service charge.
While the introduction of service charge helped eliminate the occurrences of tip pilferage, the NRAI justified it as a means to pay staff salaries and not for the service experience. Which means that prices of food and beverage items could be increased to compensate for the loss of service charge.
However, the MoCA in 2016, citing the Hotel Association of India (HAI) — whose members include the Taj hotels, Oberoi hotels and ITC Hotels, among others — had said "that the service charge is completely discretionary" and that "should a customer be dissatisfied with the dining experience, he/she can have it waived off."
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