NRAI says CCPA's restaurant service charge guidelines have no legality

The NRAI, which represents more than five lakh restaurants in the country, said in a statement that through these guidelines, there is an attempt to start a campaign against the restaurant industry practice without any legal basis.

IANSUpdated: Wednesday, July 06, 2022, 12:23 PM IST
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The fight over service charge at restaurants escalated as the National Restaurant Association of India (NRAI) on Wednesday said that the new government guidelines have no legal stand and have created unnecessary confusion among the consumers, leading to disruption in smooth business operations of hotels and restaurants.

The NRAI, which represents more than five lakh restaurants in the country, said in a statement that through these guidelines, there is an attempt to start a campaign against the restaurant industry practice without any legal basis.

According to the NRAI, the government cannot bring about a change insofar as a levy of service charge is concerned by making guidelines.

"Guidelines by the very nature of things are only for guidance and in case there is a need for such change, there has to be either a new law or an amendment in the existing laws," it stated.

"It is also relevant to state that extra charges are being levied by many other industries, including some government agencies. However, the guidelines are issued only for the restaurant Industry," the hotel industry body emphasised.

It said that service charge is part of the owner's discretion and decision regarding the total price payable by a customer with regards to sale or service of a product.

"The customer is made aware of the pricing and its components before the customer places an order for the product. Once the customer places the order after being made aware of the terms and conditions there comes into existence a binding contract," said NRAI.

No authority can interfere with binding nature of a valid contract until and unless it is shown and proved to be unconscionable or against any unfair trade practice, the industry body argued.

CCPA issues guidelines on service charge

The Central Consumer Protection Authority (CCPA), which comes under the Ministry of Consumer Affairs, has issued guidelines for preventing unfair trade practices and violation of consumer rights with regard to the hotels and restaurants levying service charge, stating that the consumer may lodge a complaint with the National Consumer Helpline (NCH) against such practice.

The guidelines issued by the CCPA stipulate that hotels or restaurants shall not add service charge automatically or by default in the food bill.

"No collection of service charge shall be done by any other name. No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary/optional and at the consumer's discretion," the new guidelines read.

The CCPA said that the consumer may make a request to the concerned hotel or restaurant to remove service charge from the bill amount. The consumer may also file a complaint against unfair trade practices with the Consumer Commission.

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