Service Charge in bill is illegal: Civil Supplies Dept

Hyderabad : Commissioner for Civil Supplies, Legal Metrology Controller C.V. Anand said including service charge in bill is illegal.

Anand said it is up to the customers wish to pay service charge or not for the services he received from the Hotels or Restaurants. From 13th of this month Legal Metrology Department will be conducting raids on all the hotels and restaurants against service charges implication. For this G.O. Ms. No. 9 has been issued.

The Commissioner held meeting with Hotels Association representatives at Civil Supplies Bhavan on Saturday to discuss on the several complaints received from customers about the service charges and GST on MRP.

Anand said “Ordinary hotel and restaurants to star hotels are charging service charges on customer against their wish. Without taking permission from customers Hotels / Restaurants should not collect Service Charges. Customer places order according to the price in the menu expecting both the goods and the services. Therefore the price displayed is expected to cover both the goods and service components.

Customer places order according to the price in the menu expecting both the goods and the services. Therefore the price displayed is expected to cover both the goods and service components. While paying bill to Hotels / Restaurants Service Charge is completely discretionary.

Even after implementation GST service charges are collected. Number of complaints from consumers received in the National Consumer Helpline that hotels and restaurants are following the practice of charging ‘service charge’ in the range of 5 – 20%, in lieu of tips. It is illegal if the customer bound to pay service charge forcibly it would amount to unfair trade practices as defined under the Act Sec. 2 (r).

The State Governments have been requested to give wide publicity to these guidelines for educating the consumers of their rights to be heard and get their disputes redressed through the Consumer Fora, and also to circulate these guidelines among the hotels / restaurants in the State for bringing about clarity on fair trade practices on the subject and their liability thereto.

A component of service is inherent in provision of food and beverages ordered by a customer. Pricing of the product therefore is expected to cover both the goods and service components. Placing of an order by a customer amounts to his/her agreement to pay the process displayed on the menu card along with the applicable taxes. Charging for anything other than the afore mentioned, without express consent of the customer, would amount to unfair trade practice. Tip or gratuity paid by a customer is towards hospitality received by him/her. It is a separate transaction between the customer and the staff of the Hotel or Restaurant, which is entered into, at the customer’s discretion.

The point of time when a customer decides to give a tip/gratuity is not when he/she enters the hotel/restaurant and also not when he/she places his/her order. It is only after completing the meal that the customer is in a position to assess the quality of service, and decide whether or not to pay a tip/gratuity and if so, how much. Therefore, if a hotel/restaurant considers that entry of a customer to a hotel/restaurant amounts to his/her implied consent to pay a fixed amount of service charge, is illegal.

In the view of the above, the bill presented to the customer may clearly display that service charge is voluntary, and the service charge column of the bill may be left blank for the customer to fill up before making payment.

Legal Metrology Department will take action and you can complain in Consumer Forum. Consumers can also send their complaints to Civil Supplies WhatsApp No. 7330774444 or to Legal Metrology Department numbers 9490165619, 27612170 or they can send mail to [email protected].

To safeguard customer benefits Central government issued GO that officials and inspectors of Legal Metrology department can take action against the Hotels / Restaurants which are charging service charges.

Service Charge is not compulsory be paid by the customers to Hotels or Restaurants in addition to their bill. Ministry of Consumer Affairs, Food & Public Distribution, Govt. of India clearly stated that is to the customers wish to pay Service Charge or not. The Govt. of India issued guidelines to State Governments to ensure consumers rights are protected as per the provisions of Consumer Protection Act 1986. Without taking permission from customers Hotels / Restaurants should not collect Service Charges.

A customer is entitled to exercise his/her rights as a consumer, to be heard and redressed under the provisions of the Act in case of unfair/restrictive trade practices, and can approach a Consumer Disputes Redressal Commission/Forum of appropriate jurisdiction. Legal Metrology Department (up to DCMO and ILMO rank) as the agency to take up this activity relating to consumer affairs and act as the complainant as per Section 2(b) and file complaint as per Section 2(c) (i) and (w) of the CP Act, 1986.

Commissioner made clear to the representatives of Star Hotel Association not charge higher prices and not to collect GST on MRP from the customers.

Star Hotel Association representatives made notice to the Civil Supplies Commissioner about the raids conducted on their business establishments by Legal Metrology Department. During the raids officials seized their billing computers and not handed back to them. This has severely affecting their business. They said that the business is service oriented and they don’t come under packaged goods sales act.