TO PAY OR NOT TO PAY – A LOOK AT SERVICE CHARGE AT RESTAURANTS

TO PAY OR NOT TO PAY – A LOOK AT SERVICE CHARGE AT RESTAURANTS

6 minutes read

Author : MyLegalWork Staff

Posted on: 10th Jan, 2017

Can you recollect the last time you had a nice dinner with friends and family at your favourite restaurant? No doubt you remember the animated discussions and the incessant chatter over some warm, delicious food. You may also faintly recollect that once the bill was presented, the dinnertime conversations slowly died away as people tried to make sense of the bill. The confusing part was that you were being asked to pay twice for the service – once as service tax and again as service charge. Eyebrows were raised, but the bill was paid in full, instead of facing the embarrassment of confronting the head waiter in view of the fellow diners. Well, here’s some good news: you may no longer be required to pay the service charge, even if it is asked for by the restaurant. The Department of Consumer Affairs has clarified that a consumer can choose not to pay the service charges levied by restaurants and hotels in case he or she is not satisfied with the services provided by the restaurant. However, the payment of service tax is compulsory.

First, let’s understand the difference between the concepts of service tax and service charge. Service tax is a government tax, which is to be paid by the customer. The restaurant collects this tax from you and deposits it with the government. Service tax can be charged only by restaurants that have air-conditioning or central air-heating facility, either fully or partly. Such a restaurant can charge service tax even if you occupy a section which does not have air-conditioning or central air-heating facilities. Service charge is charged by the restaurant management for having provided good service. It is not a requirement of law. Service charge can be seen as a tip asked for by the restaurant - generally, establishments which apply a service charge do not expect a tip over and above the total bill amount.

So, should you pay a service charge? Well, this charge is payable voluntarily, and a customer who is dissatisfied with the dining experience can certainly refuse to pay this charge. However, if before the order is placed, the restaurant has alerted the customer that it applies a service charge at a particular rate, the same is compulsorily payable.

Restaurants argue that just giving out tips does not benefit the invisible service staff - the toilet cleaners, the valet, the kitchen helpers, the dishwashers, etc. They say that service charge is uniformly applied on bills and so benefits the entire team. And indeed, the hotel industry has not taken this clarification well. The National Restaurant Association of India (NRAI) and The Federation of Hotel & Restaurant Associations of India (FHRAI) have said, “We are issuing advisories to our members and customers should be made aware of service charges. But a restaurant is well within its rights to charge whatever it chooses for its goods and services. We don't think the waiving off bit is fair.

As you can guess, most customers do not leave a tip, even if the service standards are good. As a customer, it seems fair to pay the service charge if your dining experience has been a good and if you feel that the service charge is justified. However, if your experience has been less than desirable, the present clarification by the government certainly avoids you the pain of having to pay for an incompetent service.

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