Centre reiterates charging ‘Service Charge’ not valid

New Delhi, Feb 05: The Union Government has reiterated that charging of Service Tax is not valid and its payment completely depends on the discretion of the customer.

Minister of State for Consumer Affairs, Food & Public Distribution, C.R. Chaudhary informed the Lok Sabha on Tuesday that hotels/restaurants cannot compel customers to pay service charge as it is not valid.

"Charging of Service Tax is not valid. The Government in April 2017 issued guidelines on fair trade practices related to charging of Service Charge from consumer by hotel/restaurants," said Chaudhary.

He added that payment of the service charge is optional

"As per these guidelines, Service Charge is optional and payment of it depends entirely upon the discretion of the consumers," said the minister.

He informed the House that an aggrieved consumer can approach a consumer forum of appropriate jurisdiction for redressal of his grievance related to charging of service charges by hotels and restaurants.

He was answering a question asked by DR. A. Sampath that whether it has come to the notice of the Government that despite Goods and Services Tax (GST), service tax is still charged by many businessmen, especially in restaurants?

Scores of hotels and restaurants continue to flout the April 2017 guidelines by the Department of Consumers Affairs.

As per the guidelines, the column of service tax in a bill shall be left blank so that the customers can fill it up before making the final payment.

In a nutshell, the service charge is like a tip. The only difference between a tip and service charge is that while tip is paid to waiters, the happy customers can pay the service charge to the hotel/restaurant owners.