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Say no to compulsory service charge: Do we really have a choice?

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by Shubhra Agrawal

On Monday, the consumer ministry issued a statement, stating that customers dissatisfied with services at a restaurant or hotel could simply refuse to pay the service charges. The authorities can now take legal action against those who levy these charges without the knowledge and consent of customers. Places which levy such extra costs can be charged with indulging in “unfair trade practices”. Hotels and restaurants have been advised to put this latest rule on display in order to sensitise customers. The ministry further clarified that the decision was taken after receiving many complaints from dissatisfied and over-charged customers.

The ministry further clarified that the decision was taken after receiving many complaints from dissatisfied and over-charged customers.

They were forced to pay a service charge of anything between 5% to 20%, irrespective of the kind of service they received.

The ruling received mixed responses. While the general public responded positively, there were many who worried about the impact this decision would have on the price menus. As Chef and restaurateur Manu Chandra has said, the move would result in a refactoring of prices as service charges were a way to remunerate staff. “Rentals, competition and salaries are rising. The restaurants will have to take a couple of days to work on alternate ways to meet these costs,” Chandra said.

Service Charges accomodated in prices

The restaurant might considering revising their prices to accommodate the lost service charges. | Photo Courtesy: Western Sun

The National Restaurant Association of India (NRAI) was also quick to issue a public statement conveying their dissatisfaction against the ruling. While the industry welcomed the move to sensitise the customers on the charges, they objected to making them discretionary. “Anyone can then eat and refuse to pay for service and can dispute the quality even after enjoying the hospitality”, said Pradeep Shetty, chairman of the legal matters sub-committee.

At first glance, the move seems to be defending consumer rights.

The consumer is emboldened with this move as it is completely on the discretion of the consumer to pay the service charge or not.

However, on further investigation, it seems that the decision might fail to create an impact because of its ambiguous nature. The definition of “good service” will vary from person to person. Since the service tax is already billed in the first place, it is highly unlikely that customers will grovel before the billing clerk and explain to him whether they were satisfied with the services or not. Whether the consumer will be able to choose to pay the service tax or will be emboldened with a discretionary power that will exist only on paper- only time will tell.


Featured image : Officechai
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