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India has banned service charges in hotels and restaurants

The Consumer Protection Authority of India has banned hotels and restaurants from charging service charges on bills. The order came after officials said there was an increase in complaints of customers being forced to pay fees. Restaurants often add a 5% to 15% tip to a customer’s bill under the “service charge” category. But the new rules say restaurants can no longer “add service charges by default or automatically” to the bill. The new guidelines prohibit restaurants from collecting notes from customers “under any other name” or “denying service or access to customers who refuse to tip.”

An unsavoury row over tipping at restaurants has been brewing in the country for a few years, with customers complaining that they weren’t informed about this extra charge.

India has banned service charges in hotels and restaurants
India has banned service charges in hotels and restaurants

In 2017, the government’s consumer affairs department issued a set of guidelines that consumers only have to pay the prices displayed on the menu card, including government taxes. The department says people can use their “discretion” to decide whether or not to leave a note, and that charging extra without the customer’s consent is “unfair trade practice.” The government instead encouraged restaurants to pay their employees fairly and raise the prices of products to cover costs. However, restaurants have continued to add a tip to the bill and left the competition of additional charges to patrons.

Last month, the government convened a meeting with the National Restaurant Association of India (NRAI), saying it was seeing a growing number of complaints from customers that they were still being “forced to pay service charges, often arbitrarily fixed at high rates” and that “They are harassed if they are asked to remove it from the bill.” The NRAI, which represents more than half a million restaurants, defended the practice, saying it was “a matter of personal policy” and that it was not “illegal” to charge. He argued that service charges also give the government additional revenue because restaurants pay taxes on the fees they charge customers. The new guidelines state that consumers can lodge their complaints online or through the National Consumer Helpline.


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