Service charge: Restaurants eye legal route

Synopsis

National Restaurants Association of India, or NRAI, is exploring legal options to challenge the new service charge guidelines, a trustee at the industry body told ET on Tuesday.

Restaurant owners in the country are exploring legal options to challenge the government’s order barring restaurants and hotels from adding service charge to bills.

National Restaurants Association of India, or NRAI, is exploring legal options to challenge the new service charge guidelines, a trustee at the industry body told ET on Tuesday.

“The guidelines say we’ve to take consent of customers before levying service charge. Our stance is, if we’ve informed the customer that we levy service charge on the menu and put this on boards outside, it’s already a deemed consent,” said Anurag Katriar, trustee at NRAI and managing director of Indigo Hospitality.

An official from the Department of Consumer Affairs (DoCA), however, said the guidelines do not provide for ‘deemed consent’.

“This is already covered in point 7(3) of the CCPA (Central Consumer Protection Authority) guidelines. There is nothing like ‘deemed consent’,” said the official who requested not to be named.

CCPA had on Monday issued the said order to “prevent unfair trade practices and violation of consumer rights”.

Katriar argued that restaurateurs “are not sure how to take the customer’s consent – whether there’s a form, or a defined procedure”.

NRAI represents more than 500,000 restaurant brands across premium dine-in, quick service, tea and coffee chains, bars, and delivery-only players.

Hotels industry associations, too, plan to seek clarifications from the government on the guidelines.

“We may approach CCPA seeking clarifications. These are a new set of guidelines that have been issued by CCPA and not a new law,” Pradeep Shetty, secretary of Federation of Hotel & Restaurant Associations of India (FHRAI), said.

Shetty said the industry was expecting a law that would put curbs on levying charges across all industries. “However, with these guidelines, it appears that the curbs imposed are applicable only to the hospitality industry,” he said. “Nobody was forced to pay the service charge nor was any consumer turned back if they disagreed to pay it.”

Executives representing both sectors claimed that curbing service charges would adversely impact their employees.

CCPA’s orders noted that restaurants and hotels will have to clearly inform consumers that service charge is voluntary, optional and at consumers’ discretion and they can also not restrict entry or deny services based on collection of service charge. “Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount,” the guidelines stated. DoCA had in May slammed restaurants for levying service charge. At that time, NRAI president Kabir Suri had claimed, “Levying service charge is neither illegal, nor an unfair trade practice as alleged.”

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