In an important ruling, the Delhi High Court has ordered the Federation of Hotel and Restaurant Association of India (FHRAI) to replace the commonly used term 'service charge' with 'staff contribution' in the restaurant bills. Restaurants are also asked to ensure the charge does not exceed 10% of the total bill.
Besides renaming service charges as 'staff contribution', Delhi High Court's Justice Prathiba M Singh, presiding over the case, emphasized that all establishments affiliated with FHRAI, including restaurants and hotels, must prominently display a notice on their menu cards. This notice will inform patrons that tipping is not obligatory once the staff contribution has been paid, as per TOI.
The Delhi High Court's interim order follows a plea filed by both FHRAI and the National Restaurant Association of India (NRAI), challenging the guidelines forth by the Central Consumer Protection Authority (CCPA). The CCPA's guidelines, among other provisions, discourage the automatic inclusion of a service charge in bills. The CCPA also apprised the court that some restaurants have been imposing a 20% service charge.
As reported by Bar & Bench, "The Delhi High Court was informed that while FHRAI agreed to change the terminology, NRAI has not."?The case is scheduled for further proceedings on October 3, where more clarity on this matter is expected to emerge.
Also Read:?French Startup Offers Fancy Lunch At The Edge Of Space For Rs 1?Crore
It's worth noting that last year, the Central Consumer Protection Authority (CCPA) issued comprehensive guidelines to hotels and restaurants regarding the collection of service charges. The guidelines explicitly stated that "service charge shall not be collected by adding it along with the food bill and levying GST on the total amount." In response, NRAI maintained its stance that levying a service charge is not illegal, reported ET.?
They argued, "Guidelines by the very nature of things are only for guidance, and in case there is a need for such change, there has to be either a new law or an amendment in the existing laws. Neither the government nor any authority can interfere with the decision of the business owner in this regard. Through these repeated guidelines, there is an attempt to start a campaign against the restaurant Industry practice without any legal basis."
Now it remains to be seen how the new ruling by the Delhi High Court affects restaurants and their billing system.
Also Read:?'Who Paid The Bill?' Anand Mahindra Reacts As World's Two Richest People Meet For Lunch In Paris
For the latest and more interesting financial news, keep reading Indiatimes Worth.?Click here.