Mumbai: For quite some time, restaurants, and the government have been at odds over the imposition of service charges. However, the issue has just recently come under the public scanner, with consumer bodies joining the struggle. The ministry of consumer affairs, food and public distribution called the practice "unfair," and the government said last week that it is mulling a legal framework to prevent restaurants from levying customers a service charge at all. This has landed restaurants and eateries across the board in a soup.

Following multiple consumer complaints to online consumer helplines and media reports of the same, the consumer affairs ministry adopted a strong stance against restaurants levying service charges without following standard guidelines. A lack of standard guidelines for service costs meant that restaurants charge the amount as per their discretion, ranging from five to 20 per cent of the bill, depending on the service and the restaurant management.

We asked several restaurant management and eatery owners for their take on the present issue, as the practice is about to become illegal.

Mumbai-based The Chocolate Spoon company CEO & founder and the National Restaurant Association of India (NRAI), Mumbai Chapter head Rachel Goenka stated, “Firstly, the levying of service charge is neither illegal nor an unfair trade practice as alleged," adding that this debate in the public domain is creating unnecessary confusion and disruption in restaurant operations.

Mincing no words while stating her opinion on the ongoing dispute, she continued, “Service charge exists in many industries. Aggregators call it a delivery fee, ticketing platforms call it a convenience fee, and airports levy all sorts of fees and surcharges. Why are restaurants being singled out as usual? We are always a soft target for the government.”

The government had previously in April 2017 issued guidelines on hotels/restaurants charging a service fee, which said that no restaurants or eateries can charge service tax by default in a bill. However, it was discovered that this rule was broken on multiple occasions. Customers have frequently raised issues about some restaurants levying service charges compulsorily, while others add it as a default without the consent of the consumer.

The consumer affairs ministry called a meeting on 2 June 2022 with the NRAI and consumer organisations in attendance to discuss growing complaints that consumers are being forced to pay service charges without their express consent, as the issue became increasingly about transparent business practices and consumer rights.

The Kolkata Consumer Disputes Redressal Commission declared in January that restaurants cannot forcibly impose a service charge on a consumer without their consent, and ordered restaurants to return the service charge they collected from a customer together with a compensation amount.

Agreeing with the view of the consumer commission, Delhi-based The Biryani House founder and chairman Sarvesh Chaubey acknowledged that restaurants should not impose service charges on customers. “But it can be placed as optional where customers can pay if they like the hospitality of the restaurant.”

“We at The Biryani House don't impose service charges on customers but most of the time customers pay additional service charges as a gesture towards our good hospitality," he added.

On the contrary, Delhi-based Mama's Buoi co-founder Gaurav Luthra shared a differing viewpoint. He stated that the F&B (food & beverages) industry has been scarred on account of the financial burden that the multiple waves of Covid have put on all stakeholders, including their staff. “We are trying to overcome the same and offer a stable environment to our employees, and service charge was a means to compensate them beyond salaries. In my opinion, service charge should be imposed as it is a formal and more standardised way of incentivising the staff.”

“Service charge is a means by which distribution happens in a more organised manner across all the staff members, rather than only front-end staff that shall be eyeing tips offered by guests,” he further added. This thought is echoed by other restaurateurs as well.

Agreeing with his brother and business partner Gaurav, also Delhi-based Romeo Lane co-founder Saurabh Luthra noted that although service charge is seen as an imposed move by the F&B industry, what the consumer is not aware is that, “The service charge is not for us, the sum is shared by the whole staff – from the cleaners to the servers.”

“You might end up giving a tip to that one person who served you but the service provided is not a single server thing, the efforts are equally done by the cleaner, kitchen staff and servers. Therefore, service charge is important to boost the confidence of our staff and serve consumers better every day,” he explains.

Mumbai-based Fable & True Tramm Trunk owner Ankit Anand said, “We want to create a better restaurant culture in India. We are only asking for our staff rights, while in other countries, especially Europe, not just service charge, cover charge is also compulsory at some restaurants.”

Anand believes that both their employees and consumers are equally essential to them. He added, “We want to make sure they receive the best quality service from our staff. To do that, we need to charge this surcharge on top of our regular prices to cover the cost of improving our products and services.”

Meanwhile, Delhi's Delilah's Cafe co-founder Raghu Raj Tanwar takes the middle ground on the issue. From the standpoint of a restaurateur, he believes that the service charge should be legal, but with some modifications. He noted, “As the service at a cafe and the service at a fine dining restaurant in a five-star hotel is different, the percentage too should differ accordingly,” adding that it would work evenly for hospitality as well as consumers.

Currently, however, the matter doesn’t appear to be that simple, as the government and industry stakeholders attempt to break the logjam. With a mutual agreement yet to be arrived at by both the parties, for now the restaurant industry awaits the government's next move with bated breath.