Restaurants and hotels across India are suddenly faced with a new challenge: The service charge that they had been mandatorily adding to the bill is now left to the discretion of the diners.
The Department of Consumer Affairs on Monday said that service charges billed by restaurants are optional and it is up to the customers to pay it. Calling it an unfair trade practice, the department said the charge can be waived if a consumer is dissatisfied with the services.
A major hotel body - the National Restaurant Association of India (NRAI) - however, has objected to it. President Riyaz Amlani has called it unfair, arguing that a "restaurant is well within its rights to charge whatever it chooses for its goods and services".
Now, few know that well before Monday's ruling, a similar diktat was passed by the administration of Chandigarh almost a year ago. The Union Territory's deputy commissioner had issued a communication in March saying "service charge on food bills that hotels and restaurants are levying on consumers is not backed by any statute", rendering it illegal.
So how have the hotels and restaurants in Chandigarh been dealing with the absence of service charge for nearly a year now?
Dilsher Sukhija, owner of Chandigarh's 'Icon A Boutique Hotel' on Madhya Marg told Scoopwhoop News that the scrapping of the service charge did come as an initial blow.
"It's because this sum is charged by a restaurant for the services and it goes back to the staff as an incentive. The VAT and the service tax, however, goes to the government but most diners don't realise that," he said.
But after it was made illegal, Sukhija, 27, who manages three restaurants as part of Icon, said he started a common pool for the tips that the diners left. Which is then distributed evenly among the staff.
But overall, Sukhija is happy with the ruling.
"Most diners leave generous tips if they are satisfied with the service. But when we charged them as part of the bill, the amount looked pretty inflated which would leave some disappointed," he said.
Manav Suri, who owns Gusto Kitchen & Kaffe, said,
"The service charge was a good way to incentivise the staff, which is not a highly paid segment in the hospitality industry. I now give them a percentage of the sales for motivation."
He said the scrapping hasn't affected him much, but at the same time, hasn't brought in more business either.
"But I admit that consumers are not lousy with tips if they get good service. However, they do get daunted by the hefty sum after they see multiple taxes and charges added to the amount. So I think the decision of doing away with service charge is good," he said.
Yet another restaurant owner, without wishing to be named, said an initial challenge he faced was that some diners confused the service tax (to the government) with service charge, and didn't tip the staff. Some diners even wanted the service tax scrapped based on half-information. "There used to be daily spats, but then people take time get aware," he said.