Hotels, restaurants barred from levying service charge under new CCPA guidelines

Hotels and restaurants cannot levy service charge automatically or by default in bills anymore, according to the guidelines issued by the Central Consumer Protection Authority (CCPA) on Monday. Instead, consumers would be able to decide if and how much they wish to tip the restaurant workers. This means that eateries, now, would not be able to levy any charge, direct or indirect, more than the rate of the food items.

In its guidelines, CCPA said that hotels and restaurants could not force the customers to pay service charge and that it would be solely at the customers’ discretion. Eating joints would also not be able to collect such a charge from customers under any other name as that cannot be added to the food bill.

Moreover, customers would now also be able to lodge complaint against any hotel or restaurant attempting to collect service charge by calling the National Consumer Helpline number 1915.

Notably, in the beginning of June, the Department of Consumer Affairs (DoCA) had called a meeting with restaurant associations such as Federation of Hotel & Restaurant Associations of India (FHRAI) and National Restaurant Association of India (NRAI) to discuss the matter. During the meeting, both the bodies had stated that hotels and restaurants should be able to levy a service charge as that was not illegal and that such a charge was merely a part of the invitation offered by the restaurant to the potential customers, with the latter having the choice to decide whether they wanted to avail services at such a rate or not.

However, the CCPA, a regulatory authority set up under the Consumer Protection Act, 2019, has decided to ban the levying of such a charge.

Reacting to the decision, FHRAI Vice President Gurbaxish Singh Kohli said, “Most of these guidelines issued by CCPA are already followed by hotels & restaurants. It’s extremely disheartening that the hospitality industry is constantly singled out. We have explained over and over again that there is nothing illegal in collecting a service charge. It is a charge collected for the benefit of the staff which includes everyone from the waiters to the personnel working in the kitchen who have served a consumer directly and indirectly. Besides, no hospitality establishment coaxes a consumer to pay it if for any reason they choose not to. But the industry is being painted as the black sheep in the eyes of the consumer for no reason. Ironically, there are several online websites and apps that charge convenience fees including the Government-run IRCTC. These do not even explain what the charge is for nor is the consumer given a choice to opt out of it. We ask the Government to introduce a law that is uniform to all businesses and that the hospitality industry is not discriminated against. We are an industry that creates jobs and at the end of it, any kind of ruling or order against the service charge will be detrimental to employees since they are the ones who will suffer.”

Meanwhile, Satyajit Kotwal, General Manager, The Resort, Mumbai, said, "It will not and should not impact the hotel business. This notice on service charge is not a surprise. Supreme Court had given an order on this long back. In spite of that, many establishments were still charging without informing the guests, and this act of charging without informing or making them pay mandatorily is a grave problem."