Taxation: You are not satisfied with the service of the restaurant? simple, do not pay! | Chennai News

Have you ever grumbled to anyone who will listen, about paying the service charge on your restaurant bill, despite poor service or a bad restaurant experience? Well, if so, there’s good news for you. On Jan. 2, the Department of Consumer Affairs announced that the “service charge,” which restaurants include in addition to tax, is optional, not mandatory. A press release clarifies that the service fee is only payable at the discretion of the consumer and can be waived if the consumer is dissatisfied with the service. Do restaurateurs welcome the move? Does the client feel empowered? We’re talking to leading restaurateurs, service staff at restaurants and diners about the move…
This decision is the right way to go
Personally, I think it’s a welcome decision. It is at the discretion of the consumer, as a diner, whether or not they want to pay the service charge. If I visit a restaurant myself and am unhappy with the service, I wouldn’t want to forcibly pay the service charge. So, I wholeheartedly welcome this movement. As a restaurateur, a basic understanding of service charge breakdowns is essential. Typically, restaurants charge around 10% service charge (not to be confused with service tax), of which around 5-8% is split between service staff and around 2% is collected as breakages. Since the move is relatively new, we don’t know how the actual implementation will pan out. But the Hotel Association of India I am sure will work out the details soon. It’s still too early to tell how this will affect the business, but it’s definitely the right way to go.
-Sam Paul,
Paulsons Group (owner of restaurants such as Jonahs, Sambhar)
Thanks to this move, the consumer is empowered and competition will be fierce between restaurants
As a service provider and as a consumer, I wholeheartedly support this decision. It’s great that the consumer is empowered, and that will only make competition between establishments fierce. Restaurants across the city will now compete to deliver top-notch services, so their diners will be happy with the experience and will gladly pay the service fee. Also commercially, service fees are not part of our revenue model. So there will be no significant success in the business either. The only flip side is that the service fees that are levied usually go to the staff, and this decision could significantly affect their income. However, if the establishment is responsible for improving the quality of service and training its staff properly, then this situation can be avoided. The terms are still being worked out, but overall it’s a welcome decision.
—Rakesh Sethi, Managing Director,
The Raintree, St Mary’s Road
Usually Indians as such are bad tips
To me, this whole move is very ironic, since I eliminated the service charge component of my restaurant about two and a half years ago. And the reason I did that was simple: I didn’t want my customers to make a scene, if they’re unhappy, and so they just have to pay what’s mandatory, which is ie service tax and VAT. Generally, Indians as such are poor tippers, if compared to their European or American counterparts (tipping is at least 10% of the bill by default, and increases with the number of people). In India, tipping is not even 10% — for example, for a 2000 or 3000 note, the tip is around 100… and that was before demonetization. From a restaurateur’s perspective, whether customers can choose whether or not to pay the service charge can be 50-50, in terms of business impact, for three main reasons. First, most restaurant managements barely distribute the service charge levied on staff, especially in smaller establishments. Of a 10% service charge, 5-6% is pocketed by management and about 4-5% goes to service staff. Second, it is important to understand that this is not yet law. The customer has the discretion and he can choose whether he wants to pay the amount or not. Which brings us to the third and most important factor to consider, “who” is the decision-making authority in such a scenario? Finally, how are they going to take this into account for the buffet restaurants?
— Nikhil Moturi, Crimson Chakra Owner
Service charges are a problem maker
We were thinking of stopping service fees in December itself, especially after the demonetization. There isn’t a lot of cash flow and when people use their card they don’t usually tip. As a customer, I don’t like the concept of service charges, but if I like the service, I make it a point to pay the servers. The service charges create problems in my opinion because immediately the expectations of the customers increase. And many people believe that it is the restaurant owner‘s responsibility to pay the waiters. But I want to clarify that almost 15% is paid in rent, 25% in labor costs, 10% in marketing, and then there is a return on investment and expenses. In fact, half the time there isn’t enough money for other things like fuel, maintenance costs, etc. I’m glad India is responding to this, but I would like to say that globally 20% of the actual bill is tipped to waiters. No matter what part of the world you go to, people expect you to donate 20% of your bill. And if you don’t, you’re considered a really cheap person. I’m glad it’s not compulsory and voluntary, but in India, especially after demonetization, things have become very different. People don’t have that kind of cash flow. So I don’t know where this leads. While this is a positive move, it needs to be taken in stride. The food industry is quite passionate with erratic schedules and stress levels. If people are expecting a tip, I know what’s going on in the background.
— Chief Kaushik, owner, Maplai
Retaining employees in small restaurants will be difficult now
I think customers will tip us if they like the service. And if I don’t get the money, management will take care of it. I think small restaurants will have a problem because there could be a financial crisis. Retaining their employees will be difficult, I think.
— Chandru, Service Staff, Maplai
We are confident in our service
Tips prior to the rule were given entirely to service personnel, and were not pocketed by management. We are still awaiting clarification on the definition of “good/bad service” from the NRAI. So from now on we will not change our service style because we are confident in our service. The rule came into effect only a few days ago and remains ambiguous, so it is difficult to understand the terms now. We hope to gain more clarity in a week or two.
— Japtej A, Owner, Double Roti
What people are saying:
Now we will be charged more for food
I think it is the responsibility of the owner to pay his employees. But I also think that if the service charge is removed, customers will be charged more for food. Demonetization has nothing to do with this decision. At least in Chennai no one pays cash. The goal of demonetization is to have a cashless economy and restaurants make their money.
— Swathi Vijaykrishnan, financial analyst
This will only leave us arguing with the restaurant staff
I think most hotels will not comply with this even though the rule has been put in place. This will only leave us arguing with the restaurant staff. I think they will increase the prices of the dishes because of this move. Customers should verify what they are paying. This decision didn’t affect the billing system, but yes, we started thinking about paying the parking guy, the waiter, etc.
— Vaishnavi B, analyst
I don’t like when I have to tip
I think when it comes to service charges, there should be a limit. Some restaurants charge 2%, while others charge 20%. It does not work. I will tip if I like the service, but I don’t like when I have to tip.
— Sai Rohit, IT Consultant
I like to tip based on my satisfaction
It’s a good decision. In most cases, service fees go into the owners’ pockets. You never know what they do with the money. No server will go against management by asking for a service fee. If they raise the price of food, we will immediately learn to know. These days, people check apps before going to a restaurant, so if they’ve tampered with menu card charges, we’ll know. I prefer to tip based on my satisfaction. It should not be imposed on us.
—Paramaguru Muthukumar, Lawyer

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