Hotels, restaurants barred from levying service charges; here's all you need to know

Amid rising complaints, the CCPA has issued guidelines for preventing unfair trade practices and violations of consumer rights with regard to levying of service charges.

PTIUpdated: Monday, July 04, 2022, 10:02 PM IST
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The Central Consumer Protection Authority (CCPA) on Monday barred hotels and restaurants from levying service charges automatically or by default in food bills and allowed customers to file complaints in case of violation.

Amid rising complaints, the CCPA has issued guidelines for preventing unfair trade practices and violations of consumer rights with regard to levying of service charges.

As per the guidelines, "No hotels or restaurants shall add service charge automatically or by default in the bill." There should not be any collection of service charge by any other name, it added.

No hotel or restaurant can force a consumer to pay a service charge. They have to clearly inform the consumer that the service charge is voluntary, optional and at the consumer's discretion.

"No restriction on entry or provision of services based on the collection of service charge shall be imposed on consumers," the guideline said.

Further, the service charge cannot be collected by adding it along with the food bill and levying GST on the total amount.

If any consumer finds that a hotel or restaurant is levying a service charge in violation of the guidelines, s/he can request the concerned establishment to remove it from the bill amount.

Consumers can also lodge a complaint on the National Consumer Helpline (NCH), which works as an alternate dispute redressal mechanism at the pre-litigation level, by calling 1915 or through the NCH mobile app.

They can also file complaints with the Consumer Commission.

"Most of these guidelines issued by CCPA are already followed by hotels & restaurants. It’s extremely disheartening that the hospitality industry is constantly singled out. We have explained over and over again that there is nothing illegal in collecting a service charge. It is a charge collected for the benefit of the staff which includes everyone from the waiters to the personnel working in the kitchen who have served a consumer directly and indirectly. Besides, no hospitality establishment coaxes a consumer to pay it if for any reason they choose not to. But the industry is being painted as the black sheep in the eyes of the consumer for no reason. Ironically, there are several online websites and apps that charge convenience fees including the Government-run IRCTC. These do not even explain what the charge is for nor is the consumer given a choice to opt out of it. We ask the Government to introduce a law that is uniform to all businesses and that the hospitality industry is not discriminated against. We are an industry that creates jobs and at the end of it, any kind of ruling or order against the service charge will be detrimental to employees since they are the ones who will suffer,” says Mr Gurbaxish Singh Kohli, Vice President, Federation of Hotel & Restaurant Associations of India (FHRAI).

We have taken note of the new development. These are a new set of guidelines that have been issued by CCPA and not a new law. Most of these guidelines have already been followed by hotels and restaurants. Nobody was forced to pay the service charge nor was any consumer turned back if they disagreed to pay it. The industry was expecting the enactment of a comprehensive law that would put curbs on levying charges over and above the cost of a product or service and which would be applicable across all industries. However, with these guidelines, it appears that the curbs imposed are applicable only to the hospitality industry. FHRAI may approach the CCPA seeking clarifications and to submit further suggestions. Unfortunately, the beneficial global practice for employees will take a beating. FHRAI will issue a detailed statement after examining and studying the guideline,” says Mr Pradeep Shetty, Jt. Hon. Sec., Federation of Hotel & Restaurant Associations of India (FHRAI) & Sr. Vice President, Hotel & Restaurant Association of Western India (HRAWI).

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