Service Charge Is Neither Illegal Nor In Violation Of The Law – FHRAI

To put to rest concerns and queries over restaurants and eateries collecting service charges, India’s apex Hospitality Association and the voice of the hospitality industry - The Federation of Hotel & Restaurant Associations of India (FHRAI) has clarified that a service charge, like any other charge collected by an establishment, is a part of the invitation offered by the restaurant to the potential customers. It is for the customers to decide whether they wish to patronise the said restaurant or not. To discuss and seek clarity on the matter, the Department of Consumer Affairs (DoCA) has called FHRAI for a meeting on June 02.

“Service Charge like any other charge is a proposal from the restaurant or an establishment to potential customers. It is for the customers to decide whether they wish to patronise the said restaurant or not. Service charge is considered a beneficial payment since it is meant for the benefit of the staff of the establishment. So, some establishments make a conscious choice to adopt a beneficial policy towards its staff members by assuring them a minimum tip which is a percentage of the rest of the charges. There is nothing illegal nor is it in violation of the law for restaurants to collect a service charge,” says Mr Gurbaxish Singh Kohli, Vice President, FHRAI.

FHRAI has stated that service charge, colloquially known as ‘tip’, is the amount paid to the staff of the restaurant or other similar establishment by its guest. In some instances, a restaurant may choose to include service charge amount in the bill and the percentage may vary from 5 to 15 per cent of the value billed. It is a common and accepted practice in India as well as several other countries, the Association has stated.

“It is entirely a restaurant’s discretion whether to charge service charge or not. If a guest has any objection to paying service charge then, it can be removed from the bill. It is a common practice by even other service providers that charge certain ‘Convenience Fee’ for providing services to customers. Services like train and air ticket booking through websites or portals, food ordered via website or mobile apps, or movie tickets booked through online portals all levy a convenience fee on the customers. But, it is sad to see constant demands being made from the hospitality industry on one matter or the other,” says Mr Pradeep Shetty, Jt. Hon. Sec., FHRAI.

Information regarding the amount of service charge is mentioned by restaurants on their menu cards, so that customers are well aware of this charge before availing the services.

“We have also advised our members that in the event they choose to collect service charges on behalf of their staff by including it in the bill presented to the customer, they must state the same clearly on their menu itself so that the guest is well informed of the same. The convenience fee charged by other service providers does not come with any prior intimation unlike the service charge which is mentioned as chargeable in the menu card. Not only that, unlike the convenience fees charged by other service providers, the percentage charged in a service charge is also mentioned on the menu card. Over and above this, if the guest does not wish to pay the service charge then we happily waive it off from his bill. Or, if customer mentions ahead of the bill that they would not like to pay service charge then the service charge is not charged. This option of a refund or waiver is not available on the convenience fees charged by other service providers. Only the hospitality sector is being targeted, in spite of giving full information to the guest on the menu card along with the option of full and complete waiver of the service charge. Besides, levying service charge is a global practice and even in India it has been in practice for more than half a century. The charge is neither hidden nor disguised. It is categorically and boldly mentioned in the menu. A customer patronises a food outlet with the full knowledge that they will be levied a service charge,” concludes Mr Kohli.