Centre Says Service Charge Optional. Where's The Law, Restaurants Ask

New Delhi: Restaurants cannot prevent customers from placing an order even if they refuse, at the outset, to pay the service charge, the Centre said in a set of guidelines on Friday, Union Consumer Affairs Minister Ram Vilas Paswan had announced that the guidelines make it clear that restaurants and hotels could not force customers to pay the charge and people had the right to refuse.

But the hospitality industry promptly rejected the advisory. "Guidelines are not laws," Riyaaz Amlani, president of the National Restaurant Association of India retorted, declaring that "restaurants will continue to levy service charge" unless the government comes up with a legislation to prevent them.

Friday's two-page advisory drafted by the government's legal team is the second attempt in four months to stress that the service charge, that restaurants insist goes to their staffers, had to be voluntary.

The first advisory, issued in December 2016, did increase awareness among diners that they had the choice to refuse to pay but it played too heavily on the fact that customers didn't know about the service charge till they were presented with a bill.

A large number of restaurants had responded by putting up notices at the entrance, declaring that they would charge the service charge of about 10 percent, a forced-tipping of sorts. The argument was that if someone still patronised the place, it was consent to pay the service charge.

The guidelines insist that eating joints could not turn away customers who refuse to pay the service charge. "Any restriction on entry based on this amounts to a trade practice which imposes an unjustified cost on the customer... and as such it falls under restrictive trade practices" as defined under the Consumer Protection Act.

A tip or gratuity paid by a customer is a payment for hospitality received beyond the basic minimum service meant to be delivered by the restaurant for the price printed on the menu. And it gives the reasoning: The point of time when a customer decides to give a tip is not when he, or she enters the restaurant or places the order. It is only after completing the meal that the customer is in a position to assess the quality of service and decide whether to pay a tip, and if so, how much.

Dilip Datwani, president, Hotel and Restaurant Association of Western India, said it was "sad" at the government making constant demands from the hospitality industry. "Service charge is a global practice... and is categorically and boldly mentioned in the menu," he said, wondering why eating joints had been "singled out" when many other businesses too levied such charges.

Here is the two page advisory: