Image used for representational purposes only.
Image used for representational purposes only.

Most restaurants collect ‘service charges’ in Vijayawada

While most restaurants and hotels include these charges in their menu prices, customers are only required to pay the GST.

VIJAYAWADA : Taking advantage of the lack of awareness and customers’ ignorance, most hotels and restaurants in the city are collecting an excess amount in the name of ‘service charge’ in addition to the GST on the bill.

Despite numerous incidents being reported where customers have been pressured into paying an additional fee on top of the GST, restaurant managements continue to flout the rules of the Consumer Protection Act by involuntarily adding service charges ranging from 5 to 10 per cent of the bill amount without allowing consumers the choice or discretion to decide whether they want to pay such charges.

According to guidelines issued by the Central Consumer Protection Authority (CCPA), restaurants and eateries shall not collect service charges from consumers. These guidelines were issued after the Consumer Affairs Department received complaints from consumers about being levied service charges at extremely high rates in 2022. The CCPA guidelines state customers are expected to pay a tip if they are satisfied with the service, and they have the freedom to choose the amount.

However, restaurants and eateries continue to levy these charges on their customers, taking advantage of their unawareness and ignorance. On Sunday, Karthik (name changed) visited a restaurant in Moghalrajpuram with his family. After his meal, the restaurant staff presented a bill amounting to Rs 1,276, of which Rs 58 was levied as GST at 5 per cent, and another 5 per cent of the total bill was charged as service fees.

Shocked, Karthik approached the restaurant staff, who explained service charges are paid at the discretion of consumers. To avoid the issue being escalated, the staff provided another bill removing the service charges. When asked why they did not display boards indicating that service charges are discretionary and voluntary, the staff did not respond positively and sent him away. While most restaurants and hotels include these charges in their menu prices, customers are only required to pay the GST.

Unfortunately, some consumers are unaware that they are no longer obligated to pay such charges after the introduction of GST. “The service charge amount collected from consumers goes into the pockets of restaurant management while the 5% GST is paid to the government. The Consumer Protection Act clearly states it is the responsibility of restaurant management to display boards on their premises about levying service charges on customers. While the cost of the food items being provided by the restaurant includes service charges, where do these additional service charges come from?” Karthik told TNIE.

On average, at least 200 customers visit any restaurant in the city per day, making an average bill amount of Rs 2,000. If the management charges Rs 100 in the form of a service charge, they will get an additional amount of Rs 20,000 per day and Rs 6 lakh per month.Officials from the Commercial Tax Department said customers have the right to file a complaint against such restaurants if they insist on charging a service tax. “They need to display boards or mention in their menu cards that service charges are voluntary. Customers are not aware of the rules and end up paying extra money. The staff do not inform customers that they have the option of removing the amount from the bill,” said a senior official.

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