Service charge now an unfair trade practice – Judiciary Exam – Free PDF Download

Service Charge is now an Unfair Trade Practice

• How many of you go through your restaurant and hotel bills carefully ?
• We often miss out on the breakup of taxes that are levied in our bill.
• In 2017, Ministry of Consumer Affairs had issued guidelines that restaurants and hotels can’t take service charge from customers by default.
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• Service charge is taken by restaurant for offering it’s services. It is not a tax and it is not levied by the government.
• This service charge is purely charged by the restaurants and they are free to to charge any amount as there are no set guidelines on this. It is like a tip as this does not go the govt. It is divided between the staff.
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• Service Tax is a indirect tax that we pay to the government. Any restaurant that provides additional services to the customers apart from food and beverage like AC, waiters and attendants – that falls under the ambit of service tax.
• This tax was introduced in 2012 budget.
• This amount fully goes to the government.
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• The Central Consumer Protection Authority (CCPA) has issued guidelines here on Monday preventing hotels and restaurants from levying service charge on customers. Hotels or restaurants should not add service charge automatically or by default in the food bill, according to the guidelines.
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• The guidelines added that component of service is inherent in price of food and beverages offered by the restaurant or hotel. “Pricing of the product thus covers both the goods and services component. There is no restriction on hotels or restaurants to set the prices at which they want to offer food or beverages to consumers. Thus, placing an order involves consent to pay the prices of food items displayed in the menu along with applicable taxes. Charging anything other than the said amount would amount to unfair trade practice under the Act.
• The CCPA has issued guidelines under Section 18 (2) (L) of The Consumer Protection Act, 2019.
  The guidelines are in addition to the Centre’s 2017 guidelines which prohibit the levy of service charge on consumers by hotels and restaurants.
  “unfair trade practice” means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice.

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