There is the challenge of rising inflation, slowing growth, sputtering reforms, collapse of consumer spending, not to talk of geo-political uncertainties, and the mighty Indian sarkar is playing mai baap for the consumer, seized of a pressing issue: Paying tips. No less than the Union Minister of Consumer Affairs, who is working hard to revitalise exports, has called the levying of service charge on a restaurant bill an act of deceit. Officials have held meetings with restaurant associations and called for a “robust framework” to ensure compliance with guidelines that forbid the levy of service charges by hotels and restaurants. According to the government, levying charges for anything other than “prices displayed on the menu card along with the applicable taxes”, without “express consent” of the customer, constitutes “unfair trade practices”. Such nonsense would be laughable — had it not been for the seriousness of its implications.
For, this is a throwback to the license permit raj when ill-thought through and heavy-handed government interventions marked economic policymaking. Clearly, that attempt to intrude and micro-manage that which the government should leave well alone, continues to be all too frequent. Representatives of restaurant associations are right to stand their ground. Collecting service charge is neither illegal nor in violation of law. Restaurants pay GST on the entire bill, including service charge, so the government doesn’t lose anything. In one form or another, service charges exist across sectors: Government transactions have processing fees; food-delivery services have “restaurant charges”; ticketing platforms charge a “convenience fee”. The restaurant sector has been battered by the pandemic — as per latest GDP estimates, value added by trade, hotels, transport and communication at the end of 2021-22 is much lower than its 2019-20 levels. Few would object to a charge designed to help the countless men and women employed in the sector. Moreover, as this is not uniform across restaurants, the presence of alternatives implies no restrictions on choice — there is no coercion of the consumer. Restaurants clearly mark the service charge as such and waive it if the consumer does not wish to pay. Most collections from service charge go to the staff and are often seen as an incentive in lieu of tips.
Of course, the levy of the service charge should be — as it is in most cases — clearly communicated to the consumer. It’s unclear what provoked this government intervention, where exactly are consumers being made to pay service charge kicking and screaming. The official action mirrors the arbitrariness with which a domineering state continues to wield power in economic matters. Considering the challenges the economy faces as it emerges out of the long Covid shadow, the finest financial minds in North Block should work on matters more pressing than how a restaurant tip should be paid — or not.
This editorial first appeared in the print edition on June 8, 2022 under the title ‘Service charge, please’.