HC asked hotel bodies to pay Rs 100,000 each over service charge: Govt

Despite the Central government's strict guidelines, hotels and restaurants continue to impose service charges under various pretences

The Centre on Thursday said that Delhi High Court had directed the National Restaurant Association of India and the Federation of Hotel and Restaurant Associations of India to pay Rs 100,000 each as cost for non-compliance of its order on service charge.

The high court’s order came on July 24, according to a statement of the central government.

The court, in an order passed on April 12, had directed the two hotel associations to file affidavits on the percentage of their members who imposed service charge as a mandatory condition in their bills.

It had also asked the associations to clarify if they had any objection to the term, “service charge”, being replaced with alternatives so as to prevent consumers from mistaking it for a government levy.

The alternative terms could be “staff welfare fund”, ‘staff welfare contribution”, “staff charges”, “staff welfare charges”, etc.

The court also wanted to know from the associations the percentage of members who were willing to make service charge voluntary and not mandatory, with the option given to consumers to pay an extra sum to the extent they voluntarily wish to and subject to a maximum percentage that can be charged.

The court also wanted the two industry bodies to file a list of restaurants that were supporting an earlier set of writ petitions by April 30. However, the Centre in its statement on Thursday said neither association filed affidavits in accordance with the court order.

The court granted one last opportunity to file the affidavits within four days, subject to payment of Rs 100,000 as costs in each of the petitions.

The matter is now scheduled for hearing on September 5.

Hotels and restaurants continue to levy service charge in various ways despite strict guidelines from the central government restricting the practice.

Since July 2022, the National Consumer Helpline has received more than 4,000 complaints from consumers highlighting various issues related to service charge.

These include forcing consumers to pay service charges even when they are dissatisfied with the service provided by the restaurant or hotel, and charging steep additional amounts as high as 14 or 15 per cent in the process.

A Local circles survey of 11,066 respondents found that 43 per cent of the people who visited air-conditioned restaurants in the last three months paid service charge, while just nine per cent got it removed from the bills.