Service charge in restaurants Voluntary Not mandatory; Forced taxation is an unfair business practice: Consumer Commission

the Kolkata District Consumer Dispute Redress Forum recently ruled that restaurants cannot forcibly impose a service charge on a customer and therefore ordered the affected restaurant to return the service charge it collected from a customer along with a compensation amount.

A Bench including the President Swapan Kumar Mahanty and member Ashok Kumar Ganguly ruled that the imposition of a service charge on a restaurant bill is completely voluntary and not compulsory, in accordance with the guidelines on fair business practices issued by the central government.

“POs should have been aware of the Fair Trade Practices Guidelines on Charging of Service Charges to Consumers by Hotels/Restaurants issued by the Ministry of Consumer Affairs, Government of India, stipulating among other things that service charges on bills of hotel and restaurant are completely voluntary and not obligatory”, the order read.

The Commission therefore found that the restaurant had committed an unfair business practice towards the complainant and that the imposition of service charges was illegal, dishonest and contrary to law.

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In this case, the complainant Arkadeep Sarkar and his friends had gone to dinner at Yauatcha in Kolkata in 2018. He was forced to pay the service charge stipulated by the restaurant authorities as he was told that such imposition of service charge was compulsory in their restaurant.

Therefore, the plaintiff paid the service charge in order to avoid a confrontation, but he then served the restaurant with a legal notice citing the legal provisions in force and therefore demanded an apology and Rs 25,000 as compensation.

Having received no response, the instant consumer case had been filed by the plaintiff for “illegally pocketing service fees”.

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The bench noted that although a notice was served, no written response was filed by the restaurant.

Responding to the objection raised, the Commission observed,

“Therefore, we are of the opinion that the conduct of OP-1 is unlawful, dishonest and contrary to principles of law as set forth in the Consumer Protection Act and OP-1 willfully omitted and/ or neglected to improve the complainant’s grievance.”

She further found that the restaurant had committed an unfair trade practice and that the evidence presented by the complainant had not been challenged.

It should be noted that in April 2017, the Indian government had issued guidelines on fair trading practices which, among other things, stipulated that the payment of service charges was voluntary and entirely dependent on the discretion of consumers.

As a result, the restaurant was asked to fully refund the service charge and pay Rs 13,000 as compensation and court costs to the plaintiff within 30 days.

Case Title: Arkadeep Sarkar v. Yauatcha and Ors

Click here to read/download the order

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