Service charge on food, drinks unfair trade practice: Paswan

Paswan said consumers should be informed about service charge in menu card itself and not in bill

Imposing service charge on food and drinks at hotels is an unfair trade practice and consumers need not pay it, Consumer Affairs Minister Ram Vilas Paswan said on Wednesday.

Although there is no provision under the existing law to take action against hotels/restaurants, consumers have the freedom not to pay the service charge and can decide not to eat there if they are informed in advance about it through the menu card itself.

Paswan also mentioned that in future such cases would be addressed effectively as a provision has been made in the new Consumer Protection Bill to set up a regulator CCPA. The bill is likely to see the passage in the forthcoming budget session of Parliament.

Addressing the media on this issue, Paswan said: "Our Department's view is that imposing service charge is an unfair trade practice and consumers need not pay."

There is no definition of 'service charge' in law but taking service charge without discretion of consumers is an "unfair trade practice", he said.

Paswan also said that consumers should be informed about service charge in the menu card itself and not in the bill.

"The price list in the menu card should reflect all inclusive costs including service charge," he said.

He also argued that there is no need to take service charge from consumers as price of each food item quoted in the menu card is arrived at after factoring in all expenses.

"In fact, hotels and restaurants should not charge even room service charge additionally," Paswan said.
Paswan there is no transparency on whether service charge collected from consumers is transfered to waiters.

"Ideally, the service charge should be given to poor waiters. There is no transparency at present," he added.

Consumers, he said, should be informed about service charge upfront in the menu card and later in the bill in bold size.

Asked what action is being taken against hotels/ restaurants to curb the unfair trade practice, Consumer Affairs Secretary Hem Pande said, "They also know that they are doing wrong. We had a meeting with them yesterday. We told them to come up with suggestions to address the problem."

Meanwhile, state governments have been asked to ensure that while issuing licenses for setting up of new hotels/ restaurants, such unfair trade practice is not followed.

Pande said the government cannot take stringent action at present as the Consumer Affairs Ministry does not have sufficient powers.

"Such cases will be effectively addressed by Central Consumer Protection Authority (CCPA) which will be set up after the new Consumer Protection bill gets passed in Parliament," he said.

CCPA will have powers to take suo mottu action on such cases, he added.

Till the CCPA comes into place, the government is creating an awareness among consumers on the issue.

"A well informed consumer is a king. If they unite and take action, such unfair trade practice will not take place," Pande said, urging consumers to exercise their right.