Restaurant service charge: NRAI says there is no illegality in restaurants charging service charges

Collection of service charges by restaurants is a matter of individual policy and there is no illegality in doing so, the National Restaurant Association of India (NRAI) said on Tuesday. The industry body’s response comes a day after the Department of Consumer Affairs slammed restaurants for taking service charges and adding them to the bill without obtaining express consumer consent.

“Information regarding the amount of the service charge is mentioned/displayed by restaurants on their menu cards and otherwise also displayed on the premises,” the NRAI said in a press release saying customers were therefore aware of these fees before receiving the services.

Once the customer is informed of these charges in advance and then decides to place the order, it becomes an agreement between the parties and does not constitute an unfair trade practice, he said.

“GST is also paid on said charge to the government,” the statement added.

The department called a meeting with the restaurateurs on June 2 to discuss the matter. The department said in its guidelines, released in 2017, that a customer’s entrance into a restaurant cannot by itself be construed as consent to pay a service charge. Any restriction on a consumer’s entry by requiring them to pay a service fee as a condition of placing an order amounts to a “restrictive business practice” under the Consumer Protection Act.

The guidelines clearly state that the placing of an order by a customer is equivalent to their agreement to pay the prices displayed on the menu card as well as applicable taxes. To charge anything other than that without the express consent of the customer would amount to an unfair commercial practice within the meaning of the Act.

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