Hotel industry miffed over Centre’s decision of optional service charge

Source: The Hitavada      Date: 05 Jan 2017 11:19:59


By Pallavi Singh,

Central Government recapitulated on Monday that customers dissatisfied with service can choose not to pay the service charge levied by a hotel or restaurant. Government has also asked states to ensure that hotels and restaurants should mention that the service charge is optional and customers are free not to pay, in case they are dissatisfied by the service. The Government had clarified earlier in Parliament that the authorities can take action against those levying a service charge without the knowledge and consent of consumers on charges of indulging in unfair trade practices.


The National Restaurants Association of India (NRAI), which represents independent restaurants and chains, said levying service charge was a common and accepted practice recognised by government laws. It has cited judicial standards to support its case for levying of service charges. It also issued a statement that customers are free not to eat at a restaurant if they do not wish to pay the service charge levied by it.


Following the decision, the hotel and restaurant owners of Bhopal also seem miffed as they consider it to be a direct interference in their area of service. According to them the Government is putting its hands in places which do not concern it. It will impact the industry in certain areas as the service charge is directly connected to the maintenance, property damage and at some places the salary of the staff.


General Manager at Hotel Ranjit’s Lakeview, Bhopal, Varun Kumar said that the decision is blatantly regressive for the hotel industry. “Everybody wants to save money. Why would people pay, if they have the option of not paying? The government should understand the concept of service charge. Every month the hotels suffer at least 50% to 60% breakage or property damage for which the customer is not charged. That is where the service charge comes into picture. We take it by law. If we make it optional, nobody would pay. It would be better if the Government annihilates it completely. This is a direct interference in the hotel industry, which will definitely bring loss to the industry,” said Kumar. Marketing Head of Noor-Us-Sabah Palace Hotel, Sharad Verma said, “It is too early to comment regarding the repercussions of this decision.

We will definitely mention it in the menu that service charge is optional and it is purely up to the customers’ free will, if they want to pay the service charge levied by the restaurant. Till date we never came across any issue regarding service charge. Customers always paid without any questions asked. This new decision has surely raised brows. We will see how it goes.” Manager (Operations) at Hotel Lake View Ashok, Bhopal, Abhijeet Paul said, “In some areas it will directly affect the industry. Service Tax is directly connected to the staff welfare and salary at many places. We always mentioned the service charge separately and now as the centre has decided we will clearly mention it as optional, leaving it on the customers’ will. Although till date, since the decision came out none of the customer has denied paying the service charge.”