Delhi High Court fines restaurant associations over service charge dispute

The Delhi High Court has taken a strict stance against the practice of levying service charges on food bills by hotels and restaurants. The court has imposed a fine of Rs. one lakh each on the National Restaurant Association of India and the Federation of Hotel and Restaurant Association of India for failing to comply with the directions to not charge service fees.

The High Court had clarified that no service charges should be imposed on food bills as customers often mistake it for a government tax. Despite the court's instructions, the practice of charging service tax continued, leading to the imposition of fines on the two associations. The court had suggested that hotels change the terminology and charge "staff welfare charges" instead of service tax to avoid misleading customers into believing it is a government-imposed tax.

The court also wanted the option for customers dining at hotels to decide whether they want to pay a small percentage of the bill as a service charge for the welfare of the staff. However, many hotels continued to levy service charges, leading to dissatisfaction among customers.

The Central Government had already issued guidelines against levying service charges, but many hotels and restaurants continued to ignore the directives. The court's decision to fine the associations and prohibit the practice of levying service charges aims to protect the rights of customers and prevent misleading practices.

According to a survey, 43% of people visiting air-conditioned restaurants still paid service charges, while 9% managed to have them removed from their bills by refusing to pay. The government's instruction to change the terminology to "Staff Welfare charges" if it has to be mandatory aims to provide clarity and transparency to customers about the purpose of the additional charge.

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Delhi High Court fines restaurant associations over service charge dispute

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