On Monday the central government released a press note stating that the restaurants have no authority to levy service charges on the customers unless the customers are willing to pay with their own wish. It has remained optional and nonmandatory.
But here the actual dispute between the restaurant and the government is why the restaurants are charging the service charge even if the customer is ready to a pay tip to the waiter and how can they forcefully accept it. well to understand this argument, let's differentiate between a tip and a service charge.
Basically, tips are given to the waiters as a reward by the customers when they feel contented and satisfied with their service. So, it is not mandatory that every customer should do it. It all depends upon the customer's wish. Tips are directly put down to the particular waiter's pocket if any customer willing to give.
Whereas a service charge is a compulsion that every customer should pay irrespective of his willingness. Basically service charge is taxed on the total amount of food that is ordered and it is fixed (10% on the food value). On top of that, a customer needs to pay service tax, VAT, and other charges. So, service charge is not an exception, it is mandatory.
Then why restaurants are forcing customers to pay a service charge when the tip is lucrative?
Well, restaurants consider service charge as beneficial because the service charge is fixed and every customer has to pay without fail as per their rules and regulations. The restaurant unions are claiming that on average 90% of Indians after dining in a restaurant won't pay tips even if they get the finest service, and if some of them pay, then that amount would be credited to the respective waiter's pocket. But the remaining waiters will be left with nothing. They are claiming, "if a service charge is continued then every waiter in the restaurant can share an equal amount of money with each other". The service charge gives assurance that they don't need to wait for the customers to give tips.
Who will benefit and who will lose
If one has to benefit, then the other has to lose. Removing service charges has turned the waiter's life into great uncertainty. Earlier, service charge is taken from every customer from the bill. So, there is no need to worry about his tip. but now the major stake from their income is ruined. From now onwards, they need to wait until the customer's tip. But having said that, customers, also have their own limitations on spending. Some people visit restaurants with the tight amount they wanted to eat.
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posted by varun