Have you ever found yourself staring confused at the charges and taxes mentioned on a restaurant bill when you dine out? While dining-out is an experience, terms like ‘service charge’ have been a bone of contention for a while. Lack of clarity on it, whether one should pay a service charge or not has only added to the confusion. We try to clear the picture for you before you head out for that weekend dinner date with your loved one or pals.
Service charge - service tax - tip: The difference*Service charge: A fee that goes towards providing service to customers, often in place of or in addition to tipping. It’s used to give everyone at a restaurant- from servers to chef and security guard, an extra reward for their services. It isn’t a government-levied tax, and can make up for a maximum of 10% of the total bill without taxes.
*Goods and Services Tax (GST): A consumption-based tax levied by the government based on the type of restaurant and services provided. While for non-AC restaurants the rate is 5%, for AC restaurants it’s 18%, including those that serve alcohol.
*Tip: The extra money you hand out to a restaurant staff to thank them for their service. This usually goes to the person you are tipping, or in some cases, is collected and divided only among the restaurant staff.
What’s the update?*July, 4, 2022: Central Consumer Protection Authority (CCPA) announces a ban on service charge
*July 20, 2022: High Court puts a stay on the CCPA guidelines and directs restaurant associations to ensure that the levy of service charge in addition to the price and taxes, and the obligation of customers to pay the same, is prominently displayed at the restaurant. For instance, on the menu or at the entrance*November 25, 2024: The matter is subjudice. A hearing on whether service charge is mandatory or not, was supposed to take place in the Delhi High Court. There was no update on it, till the time of going to press
Service charge and tipping in countries:America: Service fee can range from 3% to 20%, while tipping can be anywhere between 15%-20% of the bill amount
*Japan: Tipping isn’t customary, and is consider rude or offensive but there’s mandatory service charge - between 10%-15%
*European nations: A 5%-10% service charge in countries like France, Germany and Italy, while tipping practices vary within Europe. There’s a culture of rounding up a bill amount too
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