NRAI reiterates its position that charging a service charge is permissible

6 Jul 2022 , 02:41 PM

On Wednesday, the National Restaurant Association of India (NRAI) restated its position on the subject of service charges, claiming that the CCPA’s new guidelines were causing unneeded customer confusion and disrupting restaurant operations. The repeated directives, according to NRAI, were an attempt to launch an unjustified campaign against a practice in the restaurant business.

According to NRAI, it is also important to mention that many other companies, including some government institutions, impose additional fees. The rules, however, are solely applicable to the restaurant business. According to NRAI, the service charge is a component of the owner’s discretion or choice on the total amount a customer will be required to pay for the sale or servicing of a product. It is one of the costs that go into the final cost of the goods.

“The business owner’s choice in this matter cannot be influenced by the government or any other authority. It is an acknowledged commercial practice, “In a statement, the industry organization said.

The customer is informed of the pricing and its components before placing an order for the product, according to NRAI. “A legally binding contract is created whenever the buyer puts the order after being informed of the terms and conditions. Until and unless a lawful contract is shown and proven to be unconscionable or against any unfair trade practices, no authority may interfere with its binding character “NRAI declared.

The industry group continued by saying that the Income Tax Authorities, High Courts, National Consumer Disputes Redressal Commission, and former Monopolies and Restrictive Trade Practices Commission had all examined the legality, rationality, or justification of the service price (ITAT). Several judicial rulings have supported the imposition of the service charge, it was added.

Through new guidelines released on Monday, the Central Consumer Protection Authority prohibited hotels and restaurants from adding a service charge automatically or by default to bills.

According to NRAI, the imposition of a service fee also has a socio-economic component.

“In most cases, tips are given to and kept by waitstaff and stewards who serve clients; individuals behind the scenes who contribute to the overall quality of the product or service receive nothing. Even the back of the house employees are subject to point-by-point distribution under the service charge system, and their contribution is therefore recognized and rewarded in the form of a portion of the service charge that is collected from the customer. Therefore, it is up to the owner to decide how to manage their business and what policies to implement “NRAI said.