Customers can choose not to pay service charge: Restaurant owners to inform Centre at meeting

The center called for a meeting of restaurant owners on the issue of service fees charged by restaurants to customers. The meeting, called by the Department of Consumer Affairs of the Ministry of Consumer Affairs, Food and Public Distribution, will take place on June 2, 2022, with the National Restaurant Association of India (NRAI). According to a statement issued by the department, “issues related to service fees charged by restaurants will be discussed.”

The meeting comes days after Secretary of Consumer Affairs Rohit Kumar Singh wrote to NRAI, saying that restaurants collect service charges from consumers by default, although the collection is voluntary and at the discretion of consumers and not mandatory as per the law.

Kabir Suri, co-founder and director of Azure Hospitality, and president of NRAI, told The Indian Express that they have received the call from the ministry and are deliberating on an official response. He said, “The service charge has always been discretionary, and the menu of all restaurants clearly states it. That is what we will tell them at the June 2 meeting.”

Suri added, “A large portion of the service fee goes directly to employees, while the rest goes to the Social Welfare Fund to help them through good times and bad. It is a default billing option, even if customers can choose not to pay if they don’t want to.”

Sharad Madan, owner and co-founder of Kobani Restaurant at Aerocity in Delhi, said, “The service charge for the floor staff who work hard to satisfy customers and are worthy of tipping as a token of appreciation. They get paid but the service charge acts as an incentive, so we are looking forward to this meeting.”

Suri said, “Recipients can decide not to pay and tip the server directly, but in this case, backroom staff gets nothing. The service fee ensures that all staff are rewarded equally. If a customer wants to waive it, he/she can talk to management. And tell them where they are lacking in the service area.”

Amit Bagja, CEO and co-founder of Daryaganj Restaurants in the capital, added, “It is an important source of additional gain for our employees; Half of the service fee goes to them and the rest covers extras and issues we might encounter. It is clearly mentioned in the list. However, if someone does not want to pay for it, they can request that it be removed.”

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Former NRAI President Anurag Katriyar, founder of Indigo Hospitality said, “I think it is a settled issue. As long as we inform the beneficiaries in advance of the charges we are charging and they still choose to avail the services, there is nothing improper. So is the case with service charges. In fact, GST is levied. and services also on these fees which we collect and pay in full to the government.”

Qataryar added, “The service fee is neither a hidden nor a variable fee based on your service experience. It is contractually similar to the convenience fee charged for online reservations of airline tickets, movie tickets, etc. I am sure NRAI will provide these opinions and rationales to the department and they will understand our position.”

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