Delhi High Court stays central guidelines on service charges of restaurants

The National Restaurant Association of India (NRAI) and Federation of Hotel and Restaurant Association of India (FHRAI), which had opposed the move, welcomed the stay. But consumers were unsure.

FHRAI said the guidelines curtailed the right of hospitality establishments to conduct business in such manner as they saw fit.

Gurbakshish said, “As of today’s order, all instructions under the guidelines (in para 7) have been put on hold, no service charge will be levied on takeaways and all restaurants will display prominently in the restaurant that service charge will be levied. ” Federation Vice President Singh Kohli.

NRAI said in a statement that the court has also directed that the information regarding levy of service charges should be displayed on the menu card so that the customers are made aware of this charge.

also clarified that service tax Cannot be placed on any takeaway order.

“NRAI is greatly relieved by the passing of this order as it has had a direct adverse impact on the human capital otherwise employed in the business,” it said.

Akshay Anand, co-founder of Campbell Hospitality in Delhi, which runs the popular international chain Cozy Box, said the livelihood of many employees depends on service charges.

“About 30-40% of employee expenses come from service charges.”

Karan Kapoor, a 36-year-old Delhi-based entrepreneur said, “As a consumer I am not sure if the restaurant even gives this service fee to the staff that it takes from me. It is better that I present myself at the end of the meal in a transparent manner. This way, I can pay more if I am happy or not then less. It is also unfair that we also pay GST on service charge.”

There is some ambiguity in how the service charge is worked out. Many hotels do not charge this but most organized restaurants do. He did not stop charging it during the interim period of the case, but added ‘voluntarily’ to the world on the bill next to the word ‘service charge’.

A former marketing manager at a Noida-based hotel, speaking on condition of anonymity, said that even though he did not have the role of a customer, a ‘service charge’ category was added to his salary structure. “I told HR that there was no need for me to give it. But they said they have to give it because otherwise it will disturb the accounting structure.”

The restaurant industry shrank 4.23 trillion in FY20 to approx. 2 trillion in FY 2011, according to NRAI – the result of economic slowdown and the covid pandemic.

Union Commerce Minister Piyush Goyal had said that restaurants and hotels can increase prices but cannot levy service charges without the explicit consent of the customer.

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