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Levy of Service Charge by a Restaurant is a matter of individual policy and there is no illegality on levying such a charge: NRAI

Thursday, June 2, 2022, 17:48 Hrs  [IST]
HBI Staff | Hyderabad

NRAI Officials attended the meeting held on Service Charge Issue today with the Department of Consumer Affairs. This matter had also come up in 2016-17, and NRAI had provided its response to the Government. Today, NRAI reiterated the points as were put up earlier in 2017. This issue had also been satisfactorily explained by us to the Competition Commission of India on a query raised by them in January 2015.


The following points were once again reiterated by NRAI to the Department today:


·       Levy of Service Charge by a Restaurant is a matter of individual policy to decide if it is to be charged or not.

·       There is no illegality in levying such a charge.

·       Information regarding the amount of service charge is clearly mentioned/displayed by restaurants on their menu cards and otherwise also displayed on the premises, so that customers are well aware of this charge before availing the services.     

·       After a customer is made aware of such a charge in advance and then decides to place the order, it becomes an agreement between the parties, and is not an unfair trade practice. 

·       Once a customer places an order, a contract comes into existence, there is an offer by the restaurant to provide the food on the menu and it is up to the customer to accept the offer of the restaurant or not while placing his order in the restaurant. The customer has to exercise the option at that point of time whether to accept the offer of the price of the product plus service charge or not to accept the said offer. The option cannot be exercised after consuming the food and complaining about the levy of service charge. Accordingly payment of service charge is not made optional for the customers after accepting the offer and placing the order for the service. 

·       Levy of service charge is beneficial for the workmen as a class who are employed in the establishments.  Any move to the contrary would be detrimental to the interests of workers – and against the labour-friendly stance of the Government. 

·       It also brings in revenue to the Government, since tax is paid on the same.  

“Levy of service charges on the other hand cannot be questioned in law as there is no provision prohibiting levy of such charges. The menu card clearly mentions levy of extra service charges at 9% and the same is also displayed outside the restaurant providing information to the customer beforehand as well before the order is placed for food/meal. A customer who can read the order for the kind of dishes mentioned in the menu card as is the case, can very well read the conditions mentioned in the said card before placing the order for the food/meal. Non-reading of the same would necessarily be at his peril.  There is thus no unfair practice or deceptive method adopted by the respondent as contended by the complainant. In fact, the extra levy at 9% would act as a disincentive to the promotion of sales, which is a prerequisite condition for holding the trade practice to be unfair.”


On this matter, NRAI President said: “We thank the Department of Consumer Affairs for calling this meeting today. On behalf of the entire Restaurant Industry, we have firmly reiterated all facts with proof to the Department that Levy of Service Charge is neither illegal, nor an unfair trade practice as alleged, and this debate in public domain is creating unnecessary confusion and disruption in smooth operations of Restaurants.  The Service Charge is transparent, worker friendly and is also recognised by many judicial orders which have been shared with the Department. In addition, the Government also earns revenue from the Service Charge as Tax is paid by Restaurants on the same.”

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