Restaurant body fights back, says don’t eat if you don’t want to pay. QSR chains okay with the govt's move

After the Indian government made paying service charge in hotels and restaurants optional, there has been a huge cry in the hospitality sector. the National Restaurant Association of India (NRAI) is clearly not happy with the Centre’s ruling and has cited judicial precedent against making service charge optional.

The NRAI stated customers are free not to eat at a restaurant, if they do not wish to pay the service charge.

NRAI, which represents independent restaurants and chains, said levying service charge was a "common and accepted practice" that was "recognised as such" by various government departments.

The government had clarified earlier in Parliament that the authorities could act against those levying a service charge without the knowledge and consent of consumers on charges of indulging in "unfair trade practices".

In a statement issued by the Union consumer affairs ministry it had asked states to ensure hotels and restaurants displayed information that service charge was optional on their premises. The ministry also made it clear that this was being done as it had received many complaints from customers who said they were being forced to pay service charge, in lieu of tips, of anything between 5% and 20% "irrespective of the kind of service provided".

The ministry said the Hotel Association of India, when asked for clarification, replied that a "service charge is completely discretionary" and a customer could have it waived.

Defending the levying of service charge, NRAI president Riyaaz Amlani said that restaurants clearly follow the very same Consumer Protection Act that is being used to justify the move to penalise those who levy it without the consent of consumers.

"The act stops us from indulging in any unfair method or deceptive practice. We clearly mention the service charge we levy on our menus. We are not indulging in any unfair trade practice. This is all part of a bill on which the restaurants pay VAT while the employees pay income tax. It also does away with cash tips," he told TOI.

Other restraint owner feels that the Department of Consumer Affairs should have waived the charge instead of leaving matters "ambiguous".

"The diner might say the entire meal was nice but the salad was bad. What are we supposed to do in such a scenario? Most complaints we receive are about higher taxes and not service charge. The government didn't waive taxes but waived service charge that diners happily paid," he told TOI.

However most food entrepreneurs believe, this move by the government wouldn't affect the QSR chains much.

Here's what the food entrepreneurs felt:

Sagar Kumar, Nutritious Nation, gourmet health food:
"We never charged a 10% charge to our customers in the first place. It's mostly casual dining cafes, fine dining restaurants and places that serve liquor that'll come under the ambit of consumers questioning why we should pay a mandatory 10% tip when the service isn't upto the mark."

Ashish Tulsian, founder of POSist, a point of sale terminal company for restaurants :
"This move may affect businesses of restaurants for a shorter period of time. Customers will get benefited as they would have a clarity on charges. For example, biryani costing Rs 200 becomes Rs 290 after taxes. Customers will understand clearly know how the calculation has been made. Though initially the restaurants will decide to hike the prices but in the long run, customers will gain."

Sumit Gulati, Gulati Spice Market:
"We already had a customer today who came in and declared that he won't pay service charge. Without even experiencing the service, he declined. We need to understand that the intent of the decision is good and for the benefit of the client. However, Delhi is known for its notorious behaviour. The whole reason why service charge came into being is because average people here have poor tipping nature."