How you are mislead by Service Charge?
Have you ever carefully read your restaurant bill before paying? Have you ever noticed the extra charges added in your bill? Have you ever wondered why they have added service charge and service tax, both in your bill? And why you end up paying more than you had thought? Here’s why…
The basic difference between Service charge and Service tax is that service charge is levied by the restaurant and service tax is levied by the Government. This means that service charge goes in the restaurants’ pockets and the service tax goes in the Government’s pocket. Another difference is that service tax is mandatory for the restaurants to charge and collect from the customers at a fixed rate as specified and amended by the Government from time to time, whereas the service charge is charged at the discretion of the restaurants which typically varies from 0-10% of the bill amount.
How do they do it?
Service charge is an outcome of smartness of the restaurant owners. Service charge is in lieu of tips that we voluntarily leave for the waiters at the end of the meal. But, smartly, the restaurant owners have added the service charge in the bills and in such a way that most people believe it to be a compulsory charge or a part of Service Tax added in the bill. This way most of the customers end up paying tips twice. The worst part is that many restaurant owners do not pass on this benefit of service charge to their employees. It is added to their profits straight away.
What’s new?
In a path-breaking move, Govt. has declared the inclusion of service charge as illegal and an unfair trade practice if customer’s consent is missing regarding the service charge. If the customer feels that service charge has been included in the bill without his or her assent, then a complaint can be filed against that service provider, and Consumer Affairs Department can take action as well.
On 3rd January, 2017, the Supreme Court of India issued a clarification in the above mentioned subject matter. Since then, the restaurant industry is going haywire with fury. It is notified that the restaurants can add service charge in the bill only with the customer’s assent. Any amount charged without consent of the consumer can be considered as unfair trade practice. Many restaurant owners are protesting and appealing this decision. Their viewpoint is that customers do not tip their waiters generously and they don’t earn as much as they deserve. This debate goes on and on.
To Conclude
Service charge is a payment for the services provided by the restaurants. Services include waiters waiting on the customers, usage of restaurants’ air conditioned premises, cutlery, other amenities et al. If the customer does not like the hospitality of the staff or any other amenity provided by the restaurant, he can ask them to waive off the service charge. Personally, I don’t believe that there was a necessity of issuing a clarification regarding the same. It was the ignorance of most people that led the restaurants to deceive them and make huge profits.
By Vinit Goenka.