Grab that bite. The Central Consumer Protection Authority (CCPA) of India has spoken and it is not music to the ears of our eatery owners. Under its new norms, restaurants should not charge service charges on their bills, whatever such charges may be. Restaurateur lobbies were arguing that a 10% add-on was common in many parts of the world, that it served as a way to reward employees equally, and that as long as a restaurant had a fee on its menu. As already pointed out, any patron ordering the dishes listed on it agreed to its terms of service. To garner support for the charge, some outlets even placed a “#dontgrudgeit” pop-up on the tables of the National Restaurant Association of India (NRAI), claiming that it was neither a voluntary “tip” nor a “tip”. was imposed on the takeaway order, but must pay a “fee” for dine-in services that were both reasonable and protected by contract law. Since private parties are free to negotiate and no law exists against this levy, some players have also indicated that the CCPA ban could be a legal challenge. It could also be true. But should this be done?
Leave aside the lack of tipping leniency in a labor-abundant country, and focus on why anyone would prefer a service charge over and above the prices of the items ordered. For a start, it obscures what the ultimate loss of the bill-payer might be. As an ad valorem GST should already be loaded on the increased value from the restaurant charges, one must do double-deck math of the rate to arrive at a mental estimate. While this may be handy for some people, it is not very customer friendly. And if the inconsistency stems from the bill’s shock, the game’s terminology could make it worse. Since we had something called ‘service tax’ in the pre-GST days, many diners are paying this ‘service charge’ under the illusion of being a state levy. A clever move or not, it has fueled suspicions of extortion. Taken together, these two points of anger explain why the 10% fee cannot be termed as “best practice” – as demanded by the NRAI placard – without facing public pushback. Rather than taking the issue to court, restaurants would be better served by adapting to the apparent market demand for price clarity. Dine-in prices can easily be increased to cover every cost and discount menu card made for home delivery.
What a business must do for customer satisfaction, however, is different from what a state agency must enforce. In general, the CCPA should not interfere with private pricing structures. In many other sectors—think aviation—a large proportion of add-on charges are justified in one way or another. Unless the rivalry fails to fulfill its regulatory role, prices should not be controlled; This can lead us down the path of price control, which distorts the markets and leaves everyone in a worse position. Businesses should be denied liberty only for what may cause harm to others. Thus, while food safety regulations are clearly valid, a food market that throbs with competition cannot really be accused of robbing us. It just so happens that dine-in services have shown less sensitivity to price-sensitive diners who want to assess at a glance what they will be asked to pay. In some social settings, a lack of value clarity can prove awkward. Even ‘tips’ for individual servers are often driven by context, especially if the motive is to encourage quick service, secure privacy, solicit discretion, etc. It’s always a good idea for restaurants to keep up with all kinds of needs, including bill estimates.