VIKAS GUPTA tells you how restaurants run up that huge bill which you eventually pay.
In Mumbai city where eating out costs an arm and a leg, have you ever gone out with your friends or family, calculated the bill in your head and later found it to be way above what u expected? Lengthy bills with complicated and inconsistent tax structures have made the restaurants bills incomprehensible. Lets break it down!
Dal tadka 200
Palak Paneer 300
Service charge (10%) 100
Service tax (4.944% of 1100) 54.38
VAT(12.5% of 1100) 137.5
Grand Total 1291
In other words our restaurant bill rises about 30% more than menu price. Taruneet Khandpur who eats out thrice a week says,” you feel like being cheated, whatever the price is, must be included in the menu price. You should see what you pay. If all the restaurants do this at once, no restaurant can be called pricey”
Service charge: Mumbai is one of the most expensive city to eat out and to add insult to our injury, the restaurants have added a component called “service charge”. Service charge is a fancy word for compulsory tip. Many times we try to imitate the west, and end up having a ridiculous system. Even in the USA you are “morally” expected to pay tip. You have the option to not tip if you did not like the service. And the tip section in the bill is always blank for you to fill. In India, some smarty pants bought a new concept home of service charge, and since over the years we are programmed to pay what is produced to us, customers pay without questioning.
Moreover this charge is meant to be distributed to the waiters for their service which a lot of restaurant owners don’t do or make the waiters salary package in a way that they get the same amount which they would get in a fixed salary format. TGIF (Thank God Its Friday) has an interesting process. TGIF clubs the entire service charge received and then redistributes it according to designation of the employee. So, from back office to the CEO, everyone gets their share. According to TGIF manager, the waiters variable component is 50% of his total salary. We should also know that we are not expected to pay additional tip or left over change after service charge
What is more bothering is the variance in the service charge. Some charge 5% and some charge 15% and in most cases this charge is not mentioned in the menu anywhere. Restaurants at their will can decide the service charge. Here is a list of Mumbai’s famous restaurants and their service charges
1 Colaba social Colaba 10%
2 The Bar stock exchange Andheri 5%
3 Spice Club Lower parel 7%
4 Candies Bandra No
5 Masala Library BKC 10%
6 The little door Andheri 7%
7 Leo pold Colaba 10%
8 Café Mondegar Colaba No
9 TGI Fridays Lower Parel 12.5%
10 Barbeque nation Andheri (w) No
A lot of restaurants have recently introduced service charge because their competitors have and do not want to loose out on making profits. The manager at The Little door said,” the industry standard is 10%-15% but since we cannot force the customer to pay irrespective of them liking the service, we charge 7% which is reasonable”
Is it legal? It is not illegal in law, as long as it is mentioned in the menu or displayed in the restaurant.
Service tax: Collected by central government, is to be charged at 4.944% (that is 12.36% of 40% of the bill amount + service charge). Beware if your restaurant charges 12.36 on the whole amount to take advantage of your ignorance.
Vat: Collected by Maharashtra government, 12.5% must be charged on bill amount + service charge (not including service tax) and only on items prepared in the kitchen where the restaurants have “added value” and cannot be charged on packaged items like packaged drinking water or soft drink that carries MRP.
Few restaurants like 30ml bar at Infinity mall that try to discontinue this practice and include all prices in the menu end up being called pricey. They eventually had to shut down. So does that mean we never look at hidden costs? According to Mr. Pratham manager at The bar stock exchange the customers are getting more and more aware, he said, “ I get this question a lot and people appreciate that we charge 5% and not 10%”
Websites like Zomato, Burrp and Mumbai boss are filled with comments criticizing this especially if they don’t like the service. Should these websites mention this while recommending restaurants?
According to Kamlesh Barot past president of FHRAI (Federation of Hotel& Restaurant Associations of India)& HRAWI (Hotel& Restaurant Association), “ Service charge is a voluntary charge levied by the restaurants. The association cannot fix a mandate as it varies according to the what the hotels want to charge. We have explained the same stance to the government in 2008-2009”
In the current situation, can the government mandate all the restaurants to start all inclusive prices?Menu price is the gross price. In consumer goods, it is mandatory by the government for the companies to charge only on net weight basis and not on gross weight which sometimes include bulky packaging. The idea is that consumers should pay for what they get and are protected from smart marketing and hidden costs. Can such a thing be duplicated in food industry?