Many restaurants and hotels charge service charges for their services and customers have to pay voluntarily or involuntarily. Most of people pay these extra charges when they are happy and satisfied with the service given by restaurants and hotels. But what if a customer is not happy with the services? Is it to mandatory or voluntary to pay service charge?
In April 2017 Ministry of Consumer Affairs, food and public distribution has issued guidelines on Fair Trade Practices regarding service charges. Minister of Food and Consumer Affairs, Ram Villas Paswan, made it clear that it is voluntary and not mandatory to pay service charges[i]. But in response to this Riyaaz Amlani, president of National Restaurant Association of India, said that “Guidelines are not laws. Statement of Minister Paswan is causing unnecessary confusion among public. Restaurants are not violating any laws by applying service charges”[ii]. Guidelines also have mentioned that consumer can move to Consumer Forum regarding this. Still there is no definite law or legislation dealing with this sphere, so the confusion is still prevalent.
In this article we will look on whether it is mandatory or voluntary to pay service charges, various cases related to this issue and legal provision. We will also analyse the guidelines given by the Ministry of Consumer Affairs regarding service charges. Also whether it is compulsory to pay service charges if you are not happy with services given by restaurant or hotel?
Provisions for service charge and trade practice.
Under Section 2(47) in the Consumer Protection Act, 2019 “A trade practice which, for the purpose of promoting the sale, use or the supply of any goods or for the provision of any service, adopts any unfair method or deceptive practice, is to be treated as an unfair trade practice and that a consumer can make a complaint to the appropriate consumer forum established under the Act against such unfair trade practices.”
With the help of this provision service charges charged by hotel to customer would be considered as unfair trade practice if they are not appropriate. Generally restaurants charge 5-10% service charge but some hotels charge up to 30% which is not an appropriate amount and it can be considered as unfair trade practice. Also service charge applied without the consent of customer amounts to unfair trade practice and consumer can file complaint against such hotel or restaurant in consumer forum.
Guidelines by Ministry of Consumer Affairs, Food and Public Distribution on Fair Trade Practices related to service charge.
In April 2017 Ministry of Consumer Affairs, Food and Public Distribution published guidelines on their website regarding service charges. According to these guidelines
- Pricing of product must include cost of goods as well as cost of service[iii].
- Order placed by customer amounts to his or her agreement to pay for the price given on menu card along with taxes. Charging anything else from this without consent of customer would amount to unfair trade practice.
- It is totally upon the customer whether to pay the tip or gratuity also the amount, it is also after completing his or her meal. Also forcing a customer to pay service charge as condition precedent to placing order fall under restrictive trade practices. (Now in Consumer Protection Act of 2019, meaning of restrictive trade practice is mentioned under Section 2(41) of Act).
- Bill may show clearly that service charge is voluntary and service charge column may be left blank for the customer to fill before payment.
- Consumer can exercise his/her rights to be heard and redressed under provisions of Consumer Protection Act in case of restrictive or unfair trade practice and can approach a Consumer Dispute Redressal Commission/Forum.
Still these are only guidelines and there is a need of clear law for this. We can say that service charges are not mandatory to pay and you can refuse to pay if they are charged over the bill. You can also refuse to pay if the service charge is not mentioned on menu while ordering the food or service. If restaurant or hotel forced you to pay then you can approach to the Consumer Dispute Redressal Commission or Consumer Forum having appropriate jurisdiction.
What if you are not happy with food or services?
Services given by the restaurant falls under the definition of service given in section 2(42) of the Consumer Protection Act, 2019. If the services given by restaurant are not up to mark, having defect in product or deficiency in services according to section 2(10) and section 2(11) of the Consumer Protection Act, 2019 you can refuse to pay any kind of charge. If restaurant still forced you to pay you can approach to Consumer Forum having jurisdiction.
In the case Jai Jeet Singh v. Punjab Grill Restaurant[iv], Jai Jeet Singh filed a complaint against Punjab Grill Restaurant in District Consumer Dispute Redressal Commission, Central Mumbai for refund of Rs. 182/- paid by him to the opponent party as service charges along with costs and compensation. According to facts of this case Jai Jeet Singh along with his wife on 12/08/2017 had gone to the this restaurant and ordered food, but quality of food was not proper and services given by restaurant was also not proper. When he received the bill 10% of service charge amounting Rs. 181.50 was added by restaurant. However opponent behaved rudely and insisted him to pay service charges. Hence he filed complaint in consumer forum.
In this case, District Consumer Dispute Redressal Commission directed opponent to pay an amount of Rs.182/- to the complainant along with interest on that amount along with compensation of Rs.5,000/- and amount of Rs.5,000/- towards costs of litigation.
With the help of this case we can conclude that it is not compulsory to pay service charge if the services or food given by the restaurant are not up to the mark and you are not happy with the services.
Conclusion and suggestions
At the end of this article we can conclude that it not mandatory to pay service charges and if it is forced to pay, you can approach consumer forum. Still there is no clear law about service charges. If service charge is added in the pricing of food or anything that you have ordered then it becomes difficult to refuse. But you can refuse to pay service charges if food or service given by restaurant is not proper or has any deficiency in that.
- Before ordering food check whether service charges are mentioned in the menu or not. Check how much percentage of service charge you have to pay. If it is not appropriate then ask to the restaurant about this.
- If restaurant is charging service charge without your consent or without prior information given to you, refuse to pay or file complaint against that restaurant in consumer forum having jurisdiction.
- If you found any unfair trade practice approach to consumer forum.
- For any help regarding this contact National Consumer Helpline – 1800-11-4000.
“The views of the authors are personal“
[i]See this https://consumeraffairs.nic.in/latestnews/guidelines-service-charges (last visited- 13 September 2019).
[ii]See this https://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/guidelines-on-service-charge-not-law-restaurant-associations/articleshow/58341250.cms?from=mdr (last visited- 13 September 2019).
[iii]See this https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/Guidelines.pdf (last visited- 13 September 2019).
[iv]See this https://indiankanoon.org/doc/14956325/ (last visited- 13 September 2019).