In January 2022, Vaani took some of her friends for lunch at an expensive restaurant in Hauz Khas, Delhi. opportunity? Celebrating your 21st birthday. After hours of fun, food and pranks, Vaani was deeply shocked when the bill arrived. There was a huge difference in prices between the physical menu and the virtual menu.
But what was worse was that the outlet refused to remove the service charge of 10% from the bill even after Vani’s legitimate request. In the end, he had to pay.
But the next time you’re out and about and see “Service Charge @ 10%” on your restaurant bill, don’t pay. As per the latest guidelines of the Central Consumer Protection Authority (CCPA), hotels and restaurants will not be able to levy this fee on consumers by default.
What is service charge?
A service charge is an additional charge to your total restaurant bill, intended to benefit the people who served you there. This includes waiters, cleaners, cooks and other support staff in restaurants.
In 2017, the government mandated that customers were only obliged to pay government taxes on the menu price of their orders and their dine-out. Whether the customer wanted to pay the service fee or not was entirely their choice. As such, making it a part of the bill without the explicit consent of the consumer was considered unfair.
Restaurants and hotels protested against this. The income from such charges constitutes a significant part of their total earnings. Calling it “legal” and “a matter of personal policy”, the default recovery of service charges continued.
But last month, the government in a meeting with the National Restaurant Association (NRA) saw an increase in the number of customer complaints it received on the matter. These included forced payment of high service charges and harassment by consumers when asked to remove it.
Therefore the new guidelines are mandatory:
- Service fee by any other name will not be charged. Also, it will be marked separately from the food bill and GST on the bill.
- The consumer should be informed that it is at their discretion to pay this fee.
The restaurant will in no way compel the consumer to pay the service charge. - Based on this, the restriction on entry of customers or their access to restaurant services will not be decided.
However, Danish, who covers food and lifestyle for a Delhi-based publication, says most customers are embarrassed to remove it.
“Ultimately, this leads to helping those in need improve our dining experience. Most people pay it without hesitation, unless the service is exceptionally bad. But in the end, these are just add-ons,” he said.
Who will be affected?
On-ground hospitality staff like waiters, cooks, servers and more.
Indians eat about seven times a month on an average. On average, one waiter in India Earns around Rs 16,500 per month. These service charges allowed him to take home some amount in addition to his monthly salary.
Aman, who works at a well-known cafe in Delhi’s Nehru Place, agrees. “With these charges, I could earn anywhere between Rs 5,000-7,000 per month,” he says.
There is a complex framework defining minimum wages in India. It widely depends on the work area i.e. rural or urban and whether the employee is skilled, semi-skilled or unskilled. Waitressing is generally classified as semi-skilled labour, the minimum wage for this category is set at around Rs 17,000 in an urban area like Delhi.
Most restaurant employees describe this as a “bonus” for the performance. This is because tipping culture is not prevalent in India like in UK and US, where it is mandatory and forms a major part of the salary of the server. The only relief for the employees may come from adequate compensation by their employers i.e. restaurants and less reliance on such charges.
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