The latest announcements on service charge making not mandatory has received a strong criticism from the industry citing that it will impact the 8.5 million associated with the food service industry. Restaurant body NRAI feels that it is a matter of policy for a restaurant to decide if service charge is to be levied or not.
In a bolder move the government announced on Monday that if customers are not happy with the service it’s not mandatory for them to pay the service charge. If a diner is not happy with the overall experience at the restaurants and he do not like the service of the restaurants he can ask the restaurants to exclude it from the bill, the announcement said. The service charge is not a government levy and should not be confused with the mandatory VAT or service tax NRAI said, inclusion of service charge in a restaurant bill is a common and accepted practice, and has been recognized as such by various concerned Central or State Government departments in various communications and public announcements for inclusion of the same in calculating the total invoice value on which taxes are to be levied.
According to the statement issued by the government it mentioned that the government has a number of complaints from consumers 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. “Levying service charge is an established practice of several years and it has even been upheld in the court of law. Most of money collected goes to the staff and is an integral part of their incomes. Discontinuation of the same at this stage will adversely impact millions of workers and therefore we plan to continue levying the service charge as before,” comments Anurag Katriar, Executive Director & CEO at deGustibus Hospitality Pvt. Ltd.
Though, the industry has a mixed reaction to the latest announcements as it will somehow affect the restaurants growth and at some point will force restaurants especially the QSR space to provide better services.
But the big question is...are Indian consumers lived to judge the restaurants on the service provided by them. There is a crowd out there who will say that they liked the overall experience, the food but the drinks were not up to the mark or the chicken was not cooked well and hence they do not want to pay the service charge in their total bill. "The Food and Beverage Industry is one of the highest employers in India. Approximately 5.8 million people are employed by this segment. Service charge is vital for the business model and for the employees,” shares Vikrant Batra, Owner at Cafe Delhi Heights, adding that discretion will not only affect the restaurateurs but also the utility staff, drivers, store attendants, service staff, guards, dish washers whose livelihood largely depends upon service charge.
Also, in a uniform service charge, everyone benefits, believes the industry adding that people must be aware of the same once it is implemented, to avoid any kind of miscommunication. NRAI also adds that information regarding amount of service charge is to be clearly mentioned and displayed by restaurants on their menu cards or otherwise also displayed, so that customers are well aware of this charge before availing the services and can use their discretion of not using the facility offered by the restaurant. “The circular is ambiguous and will cause a lot of confusion and hassle for both, the diner and restaurateur. Moreover, quality of service is very subjective and cannot be judged as such. What is the benchmark for "good service"? Would it differ for hotels and standalone? It could differ for each guest,” believes Deepankar Arora- Chef and Partner, Tawak.
Industry also voices that for the matter of service charge, restaurants do actually pass it on to the staff contrary to the popular belief that the owners are keeping it. It's an income supplement for the staff that works hard and goes out of the way to bring smile on your face by bringing the best to your table. The country is not mature enough like the US where people tip for the service they are provided and the experience they have received. “I doubt there will be more than an infinitesimal percent who will ever leave a tip and even then not anywhere close to 10% that majority restaurants charge so it is fine to levy such charge if clearly mentioned in the menu,” adds Arora citing that there is more clarity from government is needed on the same.
However, there are restaurants that feel that this is a bold move in recent developments and feels it as a positive move for industry’s growth. Vipin Sachdev, MD- Tuscana Kryptos Restaurants says, “We have never charge service charges and because of which every single staff works toward delighting the guests getting a tip as per the wish of customers.”
“We will always abide by the laws but there is a clarity that needs to be done on the directive from the government” points Sharad Sachdeva, CEO- Lite Bite Foods.
Adding to the same, Samira Chopra Director- Cybiz BrightStar Restaurants says, "As Carl’s Jr. we believe that the customer is the king. We believe in giving SUPERSTAR service to the customers. The service charge should be on the complete discretion of the customer and his satisfaction. It should not be imposed on them."
Having said that, not much can be assessed at this stage, once it is implemented only then can we really know what works and what does not.
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