Restaurants of Vijayawada Charging “Service Charge”

In the city of Vijayawada, going out to eat at different restaurants means having to prepare for probably an extra fee called the ‘service charge.’ It is something common among many restaurants that serve as an extra source of income for employees, as most of them work hard. This includes the service charge of between 5 -10 % of the total bill amount, which is charged to the customer and forms a guarantee that the waiters, hosts, and kitchen crew get a part of their earnings apart from salaries.

However, the directives and regulations issued by the Central Consumer Protection Authority (CCPA) prohibit restaurants and eateries from charging service fees to consumers. This guideline was released after consumers complained to the Consumer Affairs Department about high service charges that were charged by various liable companies in the year 2022. This identifies with the CCPA guidelines on tipping, where the guidelines indicate that customers are supposed to pay a tip if they are satisfied with the service and they have the discretionary power to determine the cash tip amount.

On Sunday, a boy named Ankit (changed name) went to a restaurant in Moghalrajpuram with his family members. After having a meal in the restaurant, the bill he got amounted to Rs.1,276 which included Rs.58 for GST charged by the restaurant staff, aside from this restaurant also added a 5% tax to the total bill and charged as a service fee.

Amazed by this statement, Ankit went to the restaurant staff, who then told them that some service charges were paid by the consumers themselves. Indeed, to prevent the matter from being taken higher, the staff brought another bill excluding service charges. He therefore asked the staff why they do not place banners of such a nature around to inform the public that service charges are discretionary and voluntary, but they did not respond well and asked him to go away. For example, charges such as service charges, cleaning charges, and telephone calls are normally included by restaurants and hotels in their menus, and the customer only pays the GST on the total amount charged.

Regrettably, some consumers do not know that they are not bound to ever pay such charges following the integration of GST. It is worth to understand that the service charge, which ranges between 5 and 10% of meal costs, is received by the restaurant management, but the 5% GST is remitted to the government.

For example, on average, there are at least 150 customers who visit any restaurant in the city daily, if we take an average bill amount of Rs.1,500. If the management charges Rs.75 in the form of a service charge, they will earn an additional amount of Rs.11,250 daily and Rs.3.4 lakhs per month, which will directly go to the management’s pockets. An official from the Commercial Tax Department said that customers have the right to file a complaint against such restaurants if they practice charging a service tax.