Service Charge At Restaurants: All You Need To Know About The Ongoing Debate

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Service Charge At Restaurants: All You Need To Know About The Ongoing Debate


After two long years of the pandemic, dining out has become a cherished experience indeed. The wait is finally over to go and visit our favourite restaurants for a fresh meal straight from the kitchen into our plates. Recently, however, meals are proving to be extremely costly for diners. The aspect of service charges levied by restaurants has recently come under scrutiny. The Ministry of Consumer Affairs has pointed out that restaurants are levying service charges as a default billing option, even though it is completely voluntary and its collection is not mandated by law. The National Restaurant Association of India (NRAI), however, had a different opinion about this issue. Read on to know all about this ongoing debate.

Can Restaurants Levy Service Charge? What The Ministry Says

Ministry of Consumer Affairs, Food and Public Distribution’s Secretary Rohit Kumar Singh wrote a letter to the NRAI President, citing complaints by consumers on the National Consumer Helpline (NCH). The department has called a meeting on June 2, 2022, to discuss this issue with the NRAI. The Ministry says that almost all restaurants levy service charges in the range of 5-15% and have practically made it compulsory. This is different from the Goods and Services Tax or GST that is collected by the government and is more like a tip. This default billing option is not mandated by law and is completely at the discretion of the restaurant. However, restaurants do not disclose that this charge is voluntary and collect the service charge from most consumers unless they specifically ask for it to be removed.

Thus, the onus is on the consumer to be informed and be aware, and refuse to pay the charge in case of poor service. In some cases, the restaurants even resort to harassment of customers in case they do not pay the service charge. Service charge is also levied in the form of some other fee or charge in certain establishments. Further, the distribution of service charges among restaurant staff is unclear as per the Ministry. All these matters will be discussed at the meeting on June 2, reports suggest.

(Also Read: What is the Difference Between Service Tax and Service Charge?)

“It Is A Matter Of Restaurant Policy,” Says the National Restaurant Association of India (NRAI)

The NRAI responded to the letter in a statement on Tuesday, May 24, 2022. They said that this matter had come up in 2016-17 as well, and NRAI had provided its response to the government. “There is nothing new which has been communicated by the department in its letter for the meeting on June 2,” read the statement.

As per the NRAI, the service charge levied is a matter of restaurant policy that the establishment can decide for itself. “The 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,” they said.

They further said that the consumer is made well aware of the amount of service charge before placing their order. “Information regarding the amount of service charge is 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. Once the 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. GST is also paid on the said charge to the government,” the NRAI stated.

Twitter Reacts To Service Charge Debate Ahead Of June 2 Meeting

A number of Twitter users too shared their reactions to the ongoing debate. While some were of the opinion that it is a justified charge, others begged to differ.

Take a look at the reactions:

The final ruling about the service charge will be decided soon in the June 2 meeting. What do you think about this debate about service charge? Should restaurants levy this charge or should it be left to the consumer? Tell us your thoughts in the comments below.



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