Delhi HC stays govt's guidelines on service charge at restaurants

The Delhi High Court today stayed the Central Consumer Protection Authority (CCPA) guidelines which prohibited hotels and restaurants from adding service charge on food bills.

The National Restaurant Association of India (NRAI) had challenged the guidelines issued by the Central Consumer Protection Authority which barred restaurants from levying service charges.

Justice Yashwant Varma said that the members of the association will duly and prominently display on their menus the obligation of the customer to pay service charges. Service charge cannot be levied on any takeaway orders, the court noted.

This comes days after CCPA issued guidelines for preventing unfair trade practices and violation of consumer rights by levying service charges at hotels and restaurants. The government had expressed its displeasure over restaurants allegedly making service charges compulsory even though such charges are subject to the customer's discretion.

The rules stipulated that hotels or restaurants shall not add service charge automatically or by default in the food bill.

"No collection of service charge shall be done by any other name. No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer's discretion," the guidelines said. "No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers. Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount."

If any consumer finds that a hotel or restaurant is levying service charge in violation to the guidelines, a consumer may make a request to the concerned hotel or restaurant to remove service charge from the bill amount, the government had said.

A number of complaints were registered on the National Consumer Helpline (NCH) by consumers with regard to levying of service charge. The issues raised by consumers include restaurants making service charge compulsory and adding it in the bill by default, suppressing that paying such charge is optional and voluntary and embarrassing consumers in case they resist paying service charge.

Restaurant lobby NRAI had earlier said that the government guidelines have no legal basis and have created unnecessary confusion among the consumers, leading to disruption in smooth business operations of restaurants.

"Guidelines by the very nature of things are only for guidance and in case there is a need for such change, there has to be either a new law or an amendment in the existing laws," the restaurant association had said.

"It is also relevant to state that extra charges are being levied by many other industries, including some government agencies. However, the guidelines are issued only for the restaurant industry," it added.