Hotels and restaurants in Chandigarh have been barred from levying service charge on food bills by the city administration, saying the levy was not “backed by any statute”.
“There will be no service charge on food bills that hotels and restaurants are levying on consumers as it is not backed by any statute,” Ajit Balaji Joshi, Deputy Commissioner, UT Chandigarh said here on Wednesday.
At present, several restaurants and hotels in Chandigarh are charging service charge on the total food bill at their will and there is no law in the country, which allowed levying of service charge, he said.
“By levying service charge, the restaurants are putting additional burden on consumers, who already have to pay taxes in the form of value added tax (VAT) and service tax,” Mr Joshi said.
The city administration also warned of taking strict action if hotels or restaurants levy service charge.
“Strict action will be taken if any customer is forced to pay any extra charge on the pretext of service charge,” he said.
Last year, Union Finance Ministry had clarified that “service charge” collected by certain restaurants and hotels is not “service tax”.
The administration had even inspected city-based restaurants and hotels to enquire about collection of such charges from consumers.
City-based consumer activists had complained that certain restaurants and hotels were collecting service charges in the range of 5-10 per cent of the total bill amount and keeping it with themselves.