More than 40% Indians pay service charge in restaurants without objection, finds a survey

• The matter of whether restaurants can levy a service charge on their bills is expected to be resolved soon.
• 30% of respondents in a survey by LocalCircles shared that not all air-conditioned restaurants automatically levy service charges.
• 52% of consumers visiting air-conditioned restaurants were billed for service charges, but only 9% of them opposed it.

We have all faced this one time or the other. After checking a bill at the restaurant and finding an additional service charge, one may have either paid it, or refused to do so, or in some cases, not paid any tip since a service charge was already levied.

There is an ongoing case in the Delhi High Court on this matter and the National Restaurant Association of India (NRAI) and the Federation of Hotels and Restaurant Associations of India (FHRAI) are scheduled to present their perspectives on July 24 regarding the contentious issue.

A burden or part of the parcel?

Consumers visiting air-conditioned eateries are often burdened with a high service charge even if they are dissatisfied with the services provided.

However, in a survey by community social media platform LocalCircles, 43% stated that the restaurant charged the service fee, and they paid it without objections. Only 9% of those surveyed asserted their right and managed to have the service charges removed.

Interestingly, 30% of respondents shared that not all air-conditioned restaurants automatically levy service charges, indicating that some establishments do not include this charge in their bills.

Additionally, 18% of respondents stated that they had no knowledge of the issue as they either didn't pay attention to the bill or someone else paid it on their behalf.

Many participants in community discussions noted that even in cases of poor service experiences, they still paid the service charge to avoid conflict in family, social, or formal settings with restaurant staff.

Where does the matter stand in court?

On April 12, the Delhi High Court issued an interim order to industry organisations, urging them to explore changing the term "service charge" to "staff welfare charges" to avoid consumer confusion about it being a government tax.

The court also stayed the CCPA's guidelines, preventing automatic or forceful service charge levies on customers' bills. The court clarified that customers should not believe the service charge is court-approved.

The court further mandated the industry bodies to hold a meeting to determine the number of members willing to inform customers about the voluntary nature of the service charge. They were asked to pass a resolution on the percentage of members mandatorily imposing service charges. The affidavit with these details must be submitted to the court before July 24.