Tag: Service Charge

Service Charge in Hotels and Restaurants Not Mandatory

Service Charge in Hotels and Restaurants Not Mandatory

Service Charge in Hotels and Restaurants

Service Charge in Hotels and Restaurants Not Mandatory

As per guidelines issues by Government, you don’t have to pay service charge at hotels and restaurants, you can say no to it, if service is not satisfactory. Now service charge in hotels and restaurants is totally voluntarily and not mandatory. Now, the column of service charge will be left blank and which customer can fill up before making final payment. If service charge is levied mandatory then customer can file complain in consumer court.

Service charge is taken by hotels and restaurants to earn extra income. Service charge are nothing but tips that were collected by hotels and restaurants, which is supposed to be distributed among staff of the hotel or restaurants.

Hotels and restaurants were charging 5-20% as service charge. It is some sort of ‘forced tip’.. There was a practice of making service charge a part of bill. Many consumer forums complained on this issue to Consumer affairs ministry. Taking service charge without discretion of consumer is unfair trade practice.

It is important to understand the difference between Service Charge and Service Tax. Service Tax goes to government while service charge goes to owner of restaurant. Service Tax is fixed while service charge is not fixed and it varies.

Service tax refers to tax collected by Government of India from certain service providers for providing certain services e.g service provided by AC restaurants. Service tax is 14% and it is payable on 40% of total bill.

Service Tax came into effect in 1994. Service tax is applicable on all services except except those specified in the negative list if services by the Government. Service tax is applied only on services and it cannot be applied goods.

Service charge is the tips that we pay to waiters if we like the services. Not all customers pay tips so it was made a part of bill. Now it is totally optional and on discretion of the customer.