Disclose how revenue earned from service charge was used: Paswan to hotels

Food Minister says the entire earnings on that account are in violation of law

Food and Consumer Affairs Minister Ramvilas Paswan has asked the hoteliers and restaurant owners to disclose the manner in which they spend the revenue received from the ‘service charge’ collected from consumers, as the entire earnings on that account are in violation of the law.

“Hoteliers and restaurant owners should come out in open and explain to the government and tax authorities the manner in which the service charges collected are spent, as the entire exercise is illegal,” Paswan told reporters. 

The guidelines issued by the government will make the work of Consumer and Civil courts easier as and when one complaints about illegal levying of service charges, he minister said. 

“Service charge itself is a wrong practice and consumers have the right to protest and drag the offender to court,” Paswan said. 

Last week, the department of consumer affairs in a series of guidelines issued to states and hotels and restaurant owners said the invoice or bill presented to a consumer should clearly mention that service charge was voluntary and the column should be left blank to enable a consumer pay the same if he or she wished. 

The ministry has received several complaints that hotels and restaurants put service charge in the range of 5-20 per cent, in lieu of tips.

However, hotel and restaurant owners argued that guidelines could not be enforced unless there was any legal sanctity to them.

“We do mention the service charge in our bills and invoices and if any customer does not want to pay it, he or she could look for other hotels. Unless, the guidelines are made into a law, it can’t be enforced,” Joy Singh, owner of Raasta Restaurants, had told Business Standard.

The guidelines also state that if any hotel or restaurant considers a mere entry of a customer as consent to pay service charge without availing the same, it is not correct. The guidelines have been approved by the Prime Minister’s Office. 

Under the guidelines, once you order a food item you agree to pay the price of the product as mentioned in the menu along with taxes, but paying of any other charge is not right.