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India restricts service charge on food bills

July 5, 2022

India's consumer affairs authority has said tips must be voluntary and cannot be placed on bills "by any other name." Many hotels and restaurants will automatically place a 5%-15% "service charge" on customers' bills.

Assorted Indian ethnic food buffet on rustic concrete table from above: curry, fried samosa, rice biryani, dal, paneer, chapatti, naan, chicken tikka masala, traditional dishes of India for dinner
Despite the service charge being voluntary, it was often included on food billsImage: Olena Yeromenko/Zoonar/picture alliance

India has barred its restaurants and hotels from automatically placing a service tax on food bills.

India's Central Consumer Protection Authority (CCPA), a regulatory body of the Consumer Affairs Department, published the ruling on Monday.

It said that hospitality businesses could not add a "service charge automatically or by default in the food bill."

It added that restaurants could also not levy those charges "by any other name."

Hotels and restaurants will often place a surplus charge of 5% to 15% of a meal's cost on the bill in anticipation of payment, although meeting this charge is not a legal obligation for customers.

It said that "no hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that [a] service charge is voluntary, optional and at [the] consumer's discretion."

Service tax imposed by restaurants, says consumer protection authority

India's Consumer Affairs Department first established guidelines for a service charge in 2017, noting it was "totally voluntary and not mandatory."

The 2017 statement said that dining places and hotels should not "decide how much service charge is to be paid by the customer and it should be left to the discretion of the customer."

But those charges were often included in food bills, the secretary of the Consumers Affairs Department wrote in a letter to the National Restaurant Association of India in May.

He said that consumers were being misled on charges that were often high, and people were harassed if they asked for the charges to be removed.

The CCPA said it had taken the decision in the light of a number of complaints it received from people and added that several similar cases moved in courts also favored consumers, adding that courts found imposing service charges also amounted to "unfair trade practices" and in "violation of consumer rights."

The CCPA said people should ask restaurants to remove the charge, should they spot it on their bills, and register complaints with the National Consumer Helpline if they wanted to.

Edited by: Mark Hallam

Roshni Majumdar Roshni is a writer at DW's online breaking news desk and covers stories from around the world.@RoshniMaj
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