NRAI reiterates stand on service charge issue in meeting with DoCA

This matter had also come up in 2016-17 and NRAI had provided its response to the Government

NRAI officials attended the meeting held on the service charge issue with the Department of Consumer Affairs (DoCA). This matter had also come up in 2016-17 and NRAI had provided its response to the Government. NRAI has now reiterated the points as were put up by it earlier in 2017. This issue had also been satisfactorily explained by us to the Competition Commission of India on a query raised by them in January 2015. 

The following points were once again reiterated by NRAI to the DoCA: 

  • Levy of Service Charge by a restaurant is a matter of individual policy to decide if it is to be charged or not. 
  • There is no illegality in levying such a charge. 
  • Information regarding the amount of service charge is clearly mentioned/displayed by restaurants on their menu cards and otherwise also displayed on the premises, so that customers are well aware of this charge before availing the services. 
  • After a customer is made aware of such a charge in advance and then decides to place the order, it becomes an agreement between the parties and is not an unfair trade practice. 
  • Once a customer places an order, a contract comes into existence, there is an offer by the restaurant to provide the food on the menu and it is up to the customer to accept the offer of the restaurant or not while placing his order in the restaurant. The customer has to exercise the option at that point of time whether to accept the offer of the price of the product plus service charge or not to accept the said offer. The option cannot be exercised after consuming the food and complaining about the levy of service charge. Accordingly, payment of service charge is not made optional for the customers after accepting the offer and placing the order for the service. 
  • Levy of service charge is beneficial for the workmen as a class who are employed in the establishments. Any move to the contrary would be detrimental to the interests of workers – and against the labour-friendly stance of the Government. 
  • It also brings in revenue to the Government, since tax is paid on the same. 
  • There are various judicial orders which recognise/uphold levy of service charge.


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