July 6, 2022
Good morning. In today’s either/view, we discuss the new government guidelines on service charges in restaurants. We also look at the increase in sales of electric vehicles in Delhi, among other news.
📰 FEATURE STORY
Service Charge: To Pay Or Not To Pay?
A tip? 15%. While this might be a pavlovian response in the West, Indians aren’t necessarily known for their tipping etiquette. According to restaurateurs, this is precisely why a service charge is levied at the end of your bill. And in these increasingly arresting times, people working in the service industry deserve all the extra help they can get.
However, the Central Consumer Protection Authority (CCPA) believes it isn’t a customer’s job to pay a restaurant’s employees adequately. Especially when most of those customers aren’t even aware of doing it. This is what the new guidelines against service charges are based on – cold hard principles.
This Monday, the CCPA issued a few guidelines regarding a restaurant’s right to levy a service charge. The idea here is to protect a consumer’s interest and prevent unfair trade practices in the hotel industry. It even announced a hotline people can call to lodge their complaints against establishments that choose to play against the rules – it’s 1915. But first off, what is a service charge?
A service charge is an extra fee, usually added to a customer’s bill, for the services related to a primary product or service a person might be paying for. For example, freshly prepared top-quality food is the product one pays for at a restaurant. The service charge is for the wait staff that has to put in both physical and emotional labour to ensure you have a lovely time. Usually, a restaurant adds a 10% service charge to the food bill.
Of course, the restaurant business isn’t the only industry that levies a service charge. Banking, travel and tourism, and even real estate have space for an extra charge. But the CCPA’s guidelines specifically deal with the service charges added in restaurants and hotels. According to the CCPA, that’s where most of the contention was.
The authority issued five major guidelines regarding service charges in restaurants and hotels. They are laid out as follows:
- No hotel or restaurant will be allowed to add a service charge automatically to a customer’s bill.
- A service charge cannot be formally collected from customers by any other name.
- No establishment can force a customer to pay a service charge and ensure that the customer knows it is optional.
- No restrictions can be imposed on customers who do not pay the service charge.
- Service charge can also not be charged by adding it to the food bill and then levying a GST on it.
After this, if a restaurant still adds a service charge without asking, you can tell them to remove it from the bill or lodge a complaint on the National Consumer Helpline (NCH). Restaurateurs across the country are expectedly peeved off about this, though.
VIEW: It’s all about principles
For starters, a service charge was always supposed to be optional. The problem was that people were either unaware of that fact or mixed up the service tax with a service charge. Clearly, a restaurant or hotel is expected to tell you about that little mix-up, but none of them really cared till now. This is just one example of the many customs that can be classified as unfair trade practices – exploiting a consumer’s lack of awareness. Considering not every restaurant levies a service charge, the quiet inclusion in some places makes this practice dubious.
Besides, the CCPA says that the service component of a restaurant is already included in the cost of food and beverages. When it comes to the prices on a menu, there are no restrictions imposed on them. This is why the price of a Coke changes from establishment to establishment. When tacked on to a customer’s food bill, even this gets taxed. Thus, there really is no point in adding a service charge on top of this.
As per the authority, “only after eating the meal a diner is in a position to assess the quality as well as service and decide whether or not to pay a tip and, if so, how much”. In May, the Consumer Affairs Department even wrote about this to the National Restaurant Association of India (NRAI). They said that the service charge rates at certain chains and establishments had been fixed at arbitrary rates, several of which were a little too high for comfort.
More often than not, restaurants would openly mislead customers about the legality of these charges. Tricking someone into paying for something a business has to take care of is simply a violation of a consumer’s rights. Instead, what the CCPA wants business owners to do is actually pay their employees decent wages. We’re talking about a non-exploitative employer-employee relationship here!
COUNTERVIEW: Where is the illegality?
The Union government held a meeting with representatives of the restaurant industry last month to address the complaints they received about service charges. The representatives were clear about their stance – there was “no illegality in levying such a charge”. It is a “matter of individual policy”. It’s the CCPA’s guidelines that seem like an overreaction to a molehill. Hoteliers have called them “baseless and illegal”.
According to them, this talk about “secretly” imposing a service charge was completely false as the food bill always mentions it separate from the taxes. Some places even say it on their menu. Manpreet Singh, treasurer of NRAI, even said that this was the government interfering in things that didn’t concern them. “First of all, there is no law to support whatever they are saying. It is just an advisory and you cannot impose an advisory on us. It is like telling us how to run our business”, he said.
Even if tipping did become a common custom in India, there are issues within the system. Usually, a tip only goes to the waiter. While the wait staff does pull a lot of an establishment’s weight, several things are going on in the background for a business to run smoothly. Restaurateurs have said that they distribute the service charge among all the staff, i.e. cleaners, cooks, wait staff, etc. This not only adds to their wages but also incentivises the employees to perform at work.
Some have even questioned the motives of this change as a service charge isn’t unique to India. Several countries worldwide have levied service charges, especially those in Europe. The aim of this charge is to ensure that a worker gets their due. Various judicial orders have also noted the benefits of a service charge in maintaining employee satisfaction. These new guidelines make it seem like the restaurant and hotel industry is being singled out for reasons unknown.
What’s your opinion on this?
(Only subscribers can participate in polls)
a) The new guidelines against service charges are good for the people.
b) The new guidelines against service charges are anti-worker and unnecessary.
🕵️ BEYOND ECHO CHAMBERS
For the Right:
How The Modi Government Has Weaponised The ED To Go After India’s Opposition
For the Left:
How Astrology Became Toxic Superstitious Phenomenon In India
🇮🇳 STATE OF THE STATES
EV sales (Delhi) – In the first six months of 2022, more than 25,000 EVs were sold in Delhi. They account for 9.3% of all vehicles registered till June 30. An average of 143 EVs were registered every day in the national capital. Last year, that number was 71. In 2020, 25,814 EVs were registered in Delhi. Due to the pandemic, there was an overall decline in vehicle registrations, including EVs.
Why it matters: EV sales are expected to break records by the end of the year if the current trend continues. A surge in sales came as Chief Minister Arvind Kejriwal-led government launched its EV policy in August 2020. The government has set a target of 25% of overall vehicle registrations being EVs by 2024.
Increased beer consumption (Karnataka) – With the easing of Covid restrictions and scorching summer, beer consumption in the state is increasing. In the first financial quarter of 2022-23, there was a 130% increase in sales compared to last year. The sale of Indian-Made Foreign Liquor (IMFL) increased marginally. As a result, revenues of the excise department increased by 28.2%. It collected ₹7,574 crores in April, May, and June this year.
Why it matters: Last April-June, India had increasing Covid cases as the second wave was at its peak. The excise department set a revenue target of ₹29,000 crores for 2022-23. Last year, it was ₹24,580 crores. The increase shows the consumption market is recovering as people return to bars and pubs.
Hamar Lab (Chhattisgarh) – The Chhattisgarh government’s Hamar Lab (Our Lab) is becoming a model for the rest of the country. Launched in February 2020 at the Raipur district hospital, it’s an integrated health lab with state-of-the-art equipment to strengthen health services. Priyanka Shukla, the person behind the project, took up the task of reforming medical test labs in the state. The lab now conducts more than 50,000 tests a month against the previous 18,000.
Why it matters: The centre has received international recognition. Teams from the Centre for Disease Control (CDC) and pharmaceutical companies visited it to study the concept. There are now similar centres in nine district hospitals, including a community health centre in Manpur, Patan, and Palari. As more centres are established, the testing capacity will also increase.
Changes to a government school (Gujarat) – For Kubadharol High School, community support helped it turn around to achieve a 93% pass result. Previously, it was less than 50% in Class 10, and more than 100 students were enrolled outside the village in private schools travelling as much as 100 km. A 2017 community resolution provided infrastructure to the school like projectors and computers. While initially tough for convincing parents, authorities held regular meetings to show them the facilities were on par with private schools.
Why it matters: Results began improving gradually. In the 2020 SSC exam, 36 appeared with a 78% pass percentage. This year, the pass percentage was 93%, with 3 students scoring more than 90. Enrollment in the school also increased from 52 in 2017 to 76 in 2022-23. Previously, kids from economically weak backgrounds studied in government primary and private schools.
Patanjali’s Palm oil production (Assam) – The Assam government has signed an agreement with Patanjali Foods Limited to cultivate palm oil. This comes despite concerns from environmental experts and politicians warning of the impact on biodiversity, tribes, and local species. Baba Ramdev of Patanjali said they plan to set up palm oil plantations in other states. The MoU was signed following the Centre’s launch of the ₹11,040 crores National Mission on Edible Oils—Oil Palm (NMEO-OP).
Why it matters: Environmentalists say widespread palm oil cultivation will damage biodiversity, drain groundwater resources and destroy the region’s flora and fauna. The Association for Environmental Preservation earlier warned against the Centre’s move for palm oil cultivation in the Northeast. Last October, Congress MP Pradyut Bordoloi urged Narendra Modi to reconsider the palm oil project in Assam.
🔢 KEY NUMBER
$25.6 billion – India’s merchandise trade deficit in June. It’s 62% higher than June 2021 as the prices of energy and metals imports remain high.