Hotels prohibited from charging service fees; ‘Illegal’, say restaurant owners

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New Delhi: Amid mounting consumer complaints, the Central Consumer Protection Authority (CCPA) on Monday July 5 banned hotels and restaurants from levying service charges automatically or by default on food bills and allowed customers to wear complaint in case of violation.

The CCPA has published guidelines “to prevent unfair commercial practices and the violation of consumer rights” regarding the collection of service fees.

“No hotel or restaurant should add a service charge automatically or by default to the bill,” CCPA chief commissioner Nidhi Khare said in the directive.

Restaurants and hotels typically charge a 10% service charge on the food bill.

The guidelines also stated that there should be no charging for service under any other name.

“No hotel or restaurant can force a consumer to pay a service charge. They must clearly inform the consumer that service charges are voluntary, optional and at the discretion of the consumer,” the CCPA guidelines state.

The guidelines further stated that “no restrictions on entry or provision of services based on the levying of service charges shall be imposed on consumers”.

The service charge cannot be collected by adding it to the food bill and deducting the goods and services tax (GST) from the total amount, the order says.

“If a consumer finds that a hotel or restaurant is charging a service charge in violation of the guidelines, they can ask the establishment concerned to remove it from the amount of the bill.”

Customers can also lodge a complaint with the National Consumer Helpline (NCH), which operates as an alternative dispute resolution mechanism at the pre-litigation level, by calling 1915 or via the NCH mobile app.

Representative image. A worker sets a table at a restaurant at the Crown Plaza hotel, run by InterContinental Hotels Group (IHG), in New Delhi January 31, 2014. Photo: Reuters

They can also lodge complaints with the Consumer Commission. Complaint can be filed electronically through e-Daakhil portal (www.e-daakhil.nic.in) for prompt and efficient redress. Consumers can also email their complaints to the CCPA at com-ccpa@nic.in.

In addition, the customer can address a complaint to the collector of the municipality concerned for investigation and subsequent prosecution by the CCPA. The complaint may also be forwarded to the CCPA by e-mail.

The CCPA said it has observed, through grievances filed on NCH, that hotels and restaurants levy service charges on the bill by default without informing consumers that paying the charge is voluntary.

According to Indian Express, the Union government held a meeting with representatives of the hotel and restaurant industry on June 2, where they said the collection of service charges was a “matter of individual policy” and that there was “no illegality in charging such fees”. In response to this, Union Consumer, Food and Public Distribution Minister Piyush Goyal clarified that restaurants cannot ask customers to pay “hidden fees”.

‘Unfounded and illegal’: hoteliers

Several restaurant and bar owners in Delhi on Monday (July 4th) objected to CCPA guidelines prohibiting them from levying service charges automatically or by default on food bills, saying it is “completely illegal and baseless”.

The restaurateurs claimed that the service charge was not collected discreetly, as it is also mentioned on the menu and on the bill.

Slamming the guidelines, Manpreet Singh, treasurer of the National Restaurants Association of India (NRAI), said the government could not tell bar and restaurant owners how to run their businesses.

“It is completely illegal and baseless. First of all, there is no law to back up what they say. This is just an opinion and you cannot impose an opinion on us. C It’s like telling us how to run our business,” Singh told PTI.

He claimed that customers are informed in advance of the service charge and that it is mentioned on the menu. Brochures and posters are also usually displayed in restaurants, Singh added. “We don’t take it quietly.”

Priyank Sukhija, promoter of First Fiddle Restaurants, which operates bars and fine dining restaurants such as Lord of the Drinks and Tamasha, said the guidelines issued by the CCPA had no merit.

“There is no basis to what they are saying. It is completely against the law. It is just a guideline, and if necessary we will fight it,” he said.

Gaurav Chhatwal, owner of Chungwa in Greater Kailash II, asked why Indian restaurants are being targeted when service charges are levied around the world.

“I don’t agree with the new guidelines at all. It’s utter nonsense. It says on the menu and the bill that we charge a service tax, we don’t hide it,” said Chhatawl.

Gurbaxish Singh Kohli, vice president of the Federation of Hotel and Restaurant Associations of India (FHRAI), told PTI that he would consider the order as it will have “profound implications” and will approach the government through the continued, adding that the sector should not be “set apart”.

“If you want to make rules and regulations, please make a law and make everyone follow the law,” Kohli said.

“We have just received the order. We will study it in the next few days. We will approach the government obviously because we will simply tell them not to target us. Please make sure other people don’t either. Don’t single us out,” he added.

(With PTI inputs)

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