Restaurant owners say the service charge is not illegal; It is for the benefit of the employees

Restaurant owners have reiterated that it is not illegal to levy service charge by them and the amount of service charge is clearly mentioned on the menu card for the customers to make use of their choice before availing the services. He said the fee is for the benefit of the restaurant’s employees and acts as an incentive to motivate them.

“On behalf of the entire restaurant industry, we have strongly reiterated all the facts to the Department of Consumer Affairs with evidence that levying service charges is neither illegal nor unfair trade practice, and that this debate in the public domain is causing unnecessary confusion. has been and disruption of smooth functioning of restaurants,” the National Restaurant Association of India (NRAI) said in a statement.

NRAI said the service charge is transparent, labor friendly and is also recognized by several judicial orders, which have been shared with NRAI.

The idea was echoed by a similar industry body, the Federation of Hotel and Restaurant Associations of India (FHRAI). Its joint secretary Pradeep Shetty told FE that the June 2 meeting with the ministry was fruitful as the industry could present its stand and explain the nuances behind levying service charges in restaurants.

FE along with individual restaurant owners also reiterated that levying service charges was not illegal, but a matter of individual policy, and in accordance with the practice followed by other industries.

Rachel Goenka, CEO and Founder, The Chocolate Spoon Company, said, “Charging service charges is neither illegal nor is it an unfair trade practice as alleged. GST is collected and paid on service charges, so it is strange that the legality is being debated. Service charge exists in many industries but is called differently. Aggregators call it delivery fee, ticketing platforms call it convenience fee, various government departments call it processing fee, airlines and airports levy all kinds of fees and surcharges. Yet restaurants are being singled out as ever. We are always a soft target for the government.”

He said, “The service charge exists for the benefit of the restaurant employees and acts as an incentive to motivate the employees. After giving zero support to the restaurant industry during the pandemic, it is unfortunate that the government is now working on the restaurant employees.” Ultimately, this may set a poor precedent for government outreach and create further undue influence in pricing policies across industries.”

Based in Mumbai, The Chocolate Spoon Company owns restaurant brands such as The Sassy Spoon, House of Mandarin, Wicked China and Baraza Bars & Bites.

Sanjay Vazirani, CEO, Foodlink F&B Holdings India said, “Our focus has always been on providing quality experience and customer satisfaction. “We would welcome any policy and framework announced by the government with respect to service charges that would benefit the customer and keep him happy,” he added. Mumbai-based Foodlink F&B Holdings India owns restaurant brands such as Glocal Junction, China Bistro and India Bistro.

“At nine out of ten locations, the outlets have mentioned on the menu itself that they charge a service fee. So the customer has the right to decide whether they want to dine there or go elsewhere. In many places if there is a standee with the menu printed on it, it mentions below that there is a service charge in the outlet,” said Shubhankar Dhar, owner, an exclusive Bengali restaurant in Esplanade, Bengaluru.

“Dining-in is a luxury service and it is for the staff that the restaurant charges a service fee. This is to encourage employees and give them a little extra for each table or service provided to the customer. The service fee that is paid to the employees makes them feel that they are being looked after and rewarded for their service on top of their salary,” Dhar said.