‘Service charge’ confusion continues at restaurants

Many restaurants continue to add tips to their bill, making it look mandatory, despite a government directive that it should be completely discretionary

In 2017, the Central government barred restaurants from levying a mandatory service charge.

Many restaurants continue to add five to 10 per cent service charge---a term they use for tips---to their bills.

They are paying no heed to the government directive that they display a board prominently, stating the charge is discretionary and not mandatory.

“If you are not careful about the headings under which you are being charged, you could end up paying service charge, in addition to GST,” says Bangalore Bruhat Hotel Association secretary Subramanya Holla.

Darshinis and south Indian restaurants are not collecting any service charge. Upmarket restaurants, serving more expensive fare, are.

Holla says members of his association have completely stopped the practice of adding service charge to the bill.

Some like Social, a restaurant in Koramangala, display a board saying they levy service charge at 10 per cent. “This is directly handed over to the staff. The owners don’t make a profit out of it,” says manager Hitesh.

Social owner Riyaaz Amlani, former president of National Restaurant Association of India, had stated in 2017, “Guidelines are not laws. The government’s statements are confusing the public and adversely affecting the smooth functioning of restaurants.”

In his view, the levy of service charge is legal and does not violate the provisions of Consumer Protection Act 1986. The association, when contacted for this story, said its stand remains unchanged.

According to the association, it is legal for restaurants to levy a service charge as long as it is mentioned on the menu and the customer is kept informed.

Service charge directly benefits six million people employed in the industry. More than 60% employees in the industry depend on service charge to augment their income up to 30%, the association states.

“If it is clearly mentioned, then it is mandatory for the guest to pay. But if a customer is dissatisfied with our service, which rarely happens, we do not insist on service charge,” Hitesh says.

Mohit, the manager of Saatvikk, a fine dine restaurant on Brigade Road, says, “If customers see the charge included and ask us to remove it, we do,” Mohit says.

Anup, manager at Toscano in UB City, says they add service charges but leave it to the customer’s discretion.

‘Business model’

Thierry of Cafe Noir says the restaurant business model was built by factoring in service charge or tips. “It is an integral part of the hospitality business, but customers have the last say,” he told Metrolife. Cafe Noir says on the bill the charge is left to the customer’s discretion.