Service charge issue: Restaurants considering legal route

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Restaurant owners nationwide are exploring legal options to challenge the government’s order banning restaurants and hotels from adding service charges to bills.

The National Restaurants Association of India, or NRAI, is exploring legal options to challenge the new service charge guidelines, an administrator for the industry body told ET on Tuesday.

“The guidelines state that we must obtain consent from customers before charging a service charge. Our position is that if we have informed the customer that we are charging a service charge from the menu and put it on the signs outside Outside is already deemed consent,” said Anurag Katriar, NRAI Administrator and Managing Director of Indigo Hospitality.

A Department of Consumer Affairs (DoCA) official, however, said the guidelines do not provide for “deemed consent”.

“This is already covered in point 7(3) of the CCPA (Central Consumer Protection Authority) guidelines. There is no such thing as ‘presumed consent,'” said the official who asked not to be named.

The CCPA had issued the said order on Monday to “prevent unfair commercial practices and the violation of consumer rights”.

Katriar argued that restaurateurs “don’t know how to obtain customer consent – whether there is a form or a set procedure”.

NRAI represents more than 500,000 restaurant brands across high-end restaurants, quick service, tea and coffee chains, bars and delivery-only players.

Hospitality industry associations also plan to seek clarification from the government on the guidelines.

“We may contact the CCPA for clarification. This is a new set of guidelines issued by the CCPA and not new legislation,” said Pradeep Shetty, secretary of the Federation of Hotel Associations and of Restaurants of India (FHRAI).

Shetty said the industry expected legislation that would limit the collection of fees across all industries. “However, with these guidelines, it appears that the restrictions imposed only apply to the hospitality industry,” he said. “No one was forced to pay the service fee and no consumer was turned away if they refused to pay it.”

Executives representing both sectors claimed that reducing service fees would have a negative impact on their employees.

The CCPA orders noted that restaurants and hotels will have to clearly inform consumers that service charges are voluntary, optional and at the discretion of consumers and that they also cannot restrict entry or deny services on the basis for collecting the service charge. “The service charge will not be collected by adding it to the food bill and deducting GST from the total amount,” the guidelines state. The DoCA had criticized restaurants in May for charging service fees. At that time, NRAI Chairman Kabir Suri had asserted, “The levying of service charges is neither illegal nor an unfair business practice as alleged.”

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