Customers free to decide on hotel service charge: govt

The government on Friday approved new guidelines giving customers the right to decide whether to pay the service charge hotels and restaurants charge over and above the bill and service tax.

The service charge that hotels charge on food bills is in lieu of tips, normally paid to waiters at hotels and restaurants. Hotels have now taken it as their claim on customers.

Some restaurants charge up to 20 per cent as service charge and the new guidelines, if implemented, will provide relief to customers who have to pay hefty charges for no reason.

Hotels normally charge for serving customers and not selling things at a price that can be explained in terms of costs and this obviates the need for slapping separate service charges.

The guidelines, which have made service charge "totally voluntary and not mandatory", will be sent to states for necessary action, food and consumer affairs minister Ram Vilas Paswan said.

"The government has approved guidelines on service charge. As per the guidelines, service charge is totally voluntary and not mandatory now," the minister tweeted.

"Hotels and restaurants should not decide how much service charge is to be paid by the customer and it should be left to the discretion of the customer," he added.

"Guidelines are being sent to states for necessary action at their end," the minister said in another tweet.

As per the guidelines, the column of service charge in a bill will be left blank for customers to fill up before making the final payment.

"If there is mandatory levy of service charge, customers can file a complaint in the consumer court," reports quoting a senior consumer affairs ministry official said.

Moreover, the new Consumer Protection Bill under which an authority will be set up will have powers to take action, the official explained.

"Service charge does not exist. It is being wrongly charged. We have prepared an advisory on this issue. We have sent it to the PMO for approval," Paswan had said.

A number of complaints from consumers have been received that hotels and restaurants were putting 'service charge' in the range of 5-20 per cent, in lieu of tips, the ministry had said earlier.

However, the Hotel and Restaurant Association of Western India (HRAWI) claim that service charge levying is a global practice and a legitimate levy.

It is a levy on a customer who patronises a food outlet, they say, adding that hotels are not engaging in mere hospitality, but it is a business and the association says that many businesses levy such charges.