Use ‘staff contribution’ instead of ‘service charge’ on bills: Delhi HC

The Federation of Hotels and Restaurant Associations of India (FHRAI) has been ordered to specify this charge clearly on menu cards, and ensure that the amount does not exceed 10 per cent of the bill


The Delhi High Court has ordered that the hospitality industry should use the term ‘staff contribution’ instead of ‘service charge’ for the sum they charge customers. It has also directed that this charge should be clearly mentioned on menu cards and should never exceed 10 per cent of the bill.

It is assumed that this service charge goes to the waiters or servers who attend to the customers. However, since there is no guarantee that the servers actually receive the amount, customers leave tips for the workers.

While the Federation of Hotels and Restaurant Associations of India or FHRAI accepted this order, the National Restaurant Association of India or NRAI is of the opinion that the terminology cannot be changed or replaced; that it has been the accepted term all along and has never led to any confusion whatsoever.

The Court was hearing petitions against guidelines that disallow hotels and restaurants from adding ‘service charge’ to food bills. During the hearing, Justice Prathiba M Singh ordered FHRAI to visibly and clearly mention this charge on menu cards and said that the amount should never exceed 10 per cent of the bill. The restaurants are to clarify that the amount is being charged by the food outlet and not by the government.

Interestingly, no fine can be imposed or action taken against the customers if they choose not to pay the service charge.

Last year, the Central Consumer Protection Authority (CCPA) had prohibited restaurants and hotels in India from levying ‘service charge’ on food bills. Following this, the NRAI and FHRAI had challenged the decision in the High Court, leading to the order being stayed.

The matter will be heard again next month.

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