Restaurants’ big disservice to customers

Pocket ‘veiled tip’ in shape of service charge; admn asleep

Chandigarh, September 11
A number of prominent restaurants in the city continue to make hay by adding “service charge” to their bills even as the Chandigarh administration has been groping in the dark to identify the department to deal with the matter for the past five years.
Most restaurants have been burning a hole in the pockets of their customers by levying service charge, ranging between 5 per cent and 10 per cent, in addition to other taxes.
Around five years ago, the matter was first brought to notice of the Chandigarh administration by a city-based lawyer, Ajay Jagga, but the former did not respond.
The matter was then taken to the ministry of consumer affairs, New Delhi, which directed the administration to inquire into the matter and report back to it.
An inquiry was conducted by the then Assistant Excise and Taxation Commissioner, who reportedly maintained that such service charges were illegal and could not be levied.
As the restaurant owners continued to fleece customers, the matter was again raised in January by Jagga. “The then UT Adviser, Pradip Mehra, had referred the matter to the Deputy Commissioner-cum-Commissioner Excise and Taxation, who had marked it to the Assistant Excise and Taxation Commissioner (AETC). The AETC, however, sent it to the consumer affairs department on the plea that the matter came under the purview of the latter,” said Jagga.
On February 24, the consumer department again sent the complaint back to the Deputy Commissioner but the complaint once again landed back on the desk of the AETC.
Jagga, who is in no mood to give up, again approached the top brass - including the Adviser and Home Secretary. “Let’s see what happens now,” he said.
Ashok Bansal, general secretary, Chandigarh Hotel Association (CHA), said its members were not levying any service charge on their customers. Interestingly, many restaurants are not members of the CHA.
On the issue, UT AETC Naresh Dubey said he was aware of the matter but service charge did not come under his department’s jurisdiction, as the charge has not been prescribed by the competent authority and has only been devised by certain commercial establishments.
The charge is utilised by restaurant managements as they deem fit but no part of it goes towards any levy deposited with the government exchequer.
While many residents are apparently unaware of the service charge and its implication, some more aware residents feel the charge is a kind of “veiled tip” pocketed by the management in addition to the tip given to waiters.

ALLOWED TO LEVY ONLY VAT, SERVICE TAX

Most restaurants add 10 per cent service charge to the bill, which they claim goes to the common fund to be given to the staff for good service. Under the law, restaurants can charge only VAT (12.5 per cent) and service tax (3.09 per cent) on food and beverages.