Service Charge: The new guidelines to prevent unfair trade practices

Source: The post is based on the article “The new guidelines to prevent unfair trade practices” published in The Hindu on 12th July 2022.

What is the News?

The Central Consumer Protection Authority(CCPA) has announced five guidelines to prevent unfair trade practices and to protect consumer interests regarding the levy of service charges in hotels and restaurants. 

What is CCPA?

The CCPA was established in 2020 under The Consumer Protection Act, 2019 to promote, protect and enforce the rights of consumers as a class and to investigate, prosecute and punish violators.

The CCPA has issued these guidelines under section 18 of the CPA, 2019 to protect, promote and most importantly enforce the rights of the consumers and prevent violation of their rights under the Act.

What is Service Charge?

A service charge is a tip or a direct transaction between the customer and the restaurant staff, specifically the wait staff. It is a fee collected to pay for services associated with the purchase of a primary product or service. 

It is collected by hospitality sectors and food and beverage industries as a fee for serving customers.

What do the CCPA’s guidelines on service charges say?

The CCPA has issued five major guidelines regarding the levy of service charges. These guidelines are:

– No hotel or restaurant shall add a service charge automatically or by default in the bill;

– Service charge shall not be collected from consumers by any other name;

– No hotel or restaurant shall force a consumer to pay the service charge and shall clearly inform the consumer that the service charge is voluntary, optional, and at the consumer’s discretion;

– No restriction on entry or provision of services based on the collection of service charge shall be imposed on consumers; and

– Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount.

What is the redressal mechanism for consumers?

​​If any consumer finds that a hotel or restaurant is levying a service charge in violation of these guidelines, they may 1) request the concerned hotel or restaurant to remove the service charge from the bill or 2) may lodge a complaint on the National Consumer Helpline(NCH) which works as an alternate dispute redressal mechanism at the pre-litigation level by calling 1915 or 3) through the NCH mobile app.