Government clarifies Service Charge charged in Hotels is Optional

Government clarifies Service Charge charged in Hotels is optional
 What is service charge?
Service Charge is nothing but the tip given to a waiter. Currently, hotels and restaurants have started following the practice of charging ‘service charge’ in the range of 5-20%.

Majority times customers pay it unknowingly that service charge is not compulsory it is optional
When we go to Hotel majority times many hotels add the service charged along with tax.
And it becomes compulsory for everyone to pay that service charge.
The government has ruled that service charge by eateries is optional. The government says it is on the consumer's discretion whether he wants to pay the service charge or not. Details awaited.

The Department of Consumer Affairs on Monday said that it is optional on restaurants to add service charges in addition to taxes in the bill and the consumer has discretion to pay service charge or not.  "A number of complaints from consumers have been received that hotels and restaurants are following the practice of charging service charge in the range of 5-20%, in lieu of tips, which a consumer is forced to pay irrespective of the kind of service provided to him.

"The Consumer Protection Act, 1986 provides that a trade practice which, for the purpose of promoting the sale, use or the supply of any goods or for the provision of any service, adopts any unfair method or deceptive practice, is to be treated as an unfair trade practice and that a consumer can make a complaint to the appropriate consumer forum established under the Act against such unfair trade practices.

 "In this context, the department of Consumer Affairs, Central Government has called for clarification from the Hotel Association of India, which have replied that the service charge is completely discretionary and should a customer be dissatisfied with the dining experience he/she can have it waived off. Therefore, it is deemed to be accepted voluntarily."

Service charge is collected by the restaurant for rendering its service to you. It is not a tax and is not levied by the government but purely charged by the restaurants. They are free to charge any amount as there are no guidelines, but it usually varies from 4 to 10 percent

What is service tax?
It is a tax which the service provider has to pay to the government but instead of paying from their own pocket, it is being collected from the end consumers. The tax is collected by the central government. Currently, the service tax is 15% which includes Krishi Kalyan Tax of 0.5% and Swachh Bharat Tax of .5%. Service tax is implacable in the restaurant and one has to pay it, but make sure that you are paying tax only on your food bills.

What are the other charges charged by Hotels?

The other tax is VAT (value added tax) which varies from state to state and is charged on goods and services at various items.
Restaurants and hotels charge VAT on food and drinks which are being internally prepared.
However, VAT is not charged on the items which are not being made in the restaurant.
For example, Buying the bottle of ThumsUp or Cold Drink


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Monday, January 2, 2017

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