Is Service Charge by Restaurants Illegal? Know What the Govt Says

The service charge levied by restaurants without customers’ consent is termed illegal by Union Minister Piyush Goyal. The minister clarified that a customer has the right to skip the payment of the service charge added by restaurants and hotels to their bills.

Earlier, the National Restaurant Association of India (NRAI) had claimed that service charge by restaurants and eateries in India is legal, and the Department of Consumer Affairs has yet to decide on the issue. NRAI issued a statement that clarified that eateries are well within their rights to exercise the practice of charge in the bills presented to customers since no law prohibits this action.

NRAI issues clarification on #ServiceCharge Issue.#DontGrudgeIt #ServiceChargeIsLegal #Restaurants #Restaurantindustry pic.twitter.com/hYy3Ar2nO4

— NRAI (@NRAI_India) June 2, 2022

However, the new statement by Piyush Goyal has refuted the claims of NRAI. He has said that even though there are no laws that deem the service charge by restaurants as completely unlawful, a customer has the right to contest this charge before one orders their meal. He further went on to add that a customer can challenge the addition of a charge to their bill even while having the food.

Recently, DoCA held a meeting on Thursday with the representatives from NRAI to discuss the issue of the service charge levied by the restaurants and hotels. After the discussions, rumours emerged that the service charge was totally illegal; however, NRAI came forward and issued an explanation. Following this, Goyal made his statement that has made the issue catch fire.

For those who are confused about the service charge, let us inform you that the service charge is an addition to your bill, which the eateries include to secure money for paying their staff. It should not be confused with the service tax levied on the food and beverages you order at the restaurants.

Reportedly Indian govt is now working on a legal framework to sort out the confusion surrounding service charges. The new law, which will be formulated by the inputs from DoCA, is said to curb the unethical practice of inclusion of the service charge in the overall bill by restaurants.

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