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Saturday, July 20, 2024

The Ethical Eating-Out Dilemma: Should you tip or pay the service charge?

Unlike the service charge, tipping is more customary and is dependent on the customer.

When dining out at a restaurant, there are generally two types of people: A. those who see the service charge, blame the restaurant for it but end up paying it, and B. those who get the service charge removed from their bill, no matter what.

A service charge might sound like a tax paid to the government as it comes written along with the Goods and Services Tax in your bill, but it is actually a fee the restaurant charges for the services that they provide.

You see, unlike the service charge, tipping is more customary and often depends on our mood, the vatavaran (environment) of the restaurant that they have created, and the behaviour of the staff. For example, if you are on a first date, you might tip more to look good.

But what exactly are they, and how different are they exactly, and which one should you pay?

Let’s start with the service charge.

What is the service charge?

“We, in India, have a service charge, but it is completely in the hands of the consumers. They can pay more, or remove it, it’s completely up to them,” says Sean Pereira, General Manager at the Hard Rock Cafe in Kolkata.

Sean says that service charge is something that is utilised to give the waiters, servers, the housekeeper, and everyone else in the team an ‘extra sum of revenue’.

He explains that even though the service charge is not a new concept, over the years, America has revolutionised service expectations by providing over-the-top service in restaurants, which has further shaped the concept of the service charge.

“In Europe, it is more like a flat fee that people give to remunerate their staff,” Sean adds.

Sean further says that for India, service charges are also asked at the discretion of the consumers. Yes, you read that right. You don’t have to pay service charges, even in those restaurants where they have written on their menu that you have to ‘pay a service charge’.

Abhinav Shrivastava, Co-founding partner at GSL Chambers and advocate-on-record, Supreme Court of India, tells us that the Central Consumer Protection Authority (CCPA) has stated that service charges are not imposed by the government and announced a complete ban on service charges on July 4, 2022.

“No one can be forced to pay service charges,” he says.

But let us tell you, there’s a difference between the GST and the service charge that appears on your bill. The Goods and Service Charge that is applied to your bill is compulsory, and you can’t run away from it.

The GST that you pay in restaurants is divided into two slabs, Abhinav explains.

  • The non-AC restaurants have to charge 5%
  • The AC restaurants have to charge 18% for food and beverages being served.

“This goes to the government,” Abhinav says. But the service charge is entirely different.

“Service charge is a fee collected by specific industries for providing a particular type of service to its customers. The establishment charges it and the percentage of service charge is at the company’s discretion,” says Prasanta Nandi, the F& B Manager at Hyatt Centric Ballygunge, Kolkata.

“It usually varies from 4-10%. A service charge is usually added to the cost of services rendered. In terms of restaurants, it is usually a certain percentage of the total bill without taxes,” he adds.

For instance, Nandi says that the Hyatt Kolkata branch charges around 5 per cent of service charge on a customer bill.

Anand Raj Maurya, the restaurant manager at Plaka, Bengaluru, says the policy of taking service charges allows them to ensure that their staff is fairly compensated for their ‘hard work’ and ‘dedication’ to providing excellent service.

It also helps them maintain a high standard of hospitality and allows our team to focus on creating a memorable dining experience for every guest.

“People think that the hospitality industry is a very lucrative one, but it is actually filled with sudden expenses (hence the service charge can help),” Sean adds.

Who gets your money?

Now, different restaurants have different policies when it comes to service charges and where your service charge money goes.

India Today spoke with various cafés and restaurants, and we have extrapolated the information that in nine out of ten cases, the money from service charges is mostly divided amongst all the staff and the management that works in the restaurant.

However, the case for tipping is different (we will get to that shortly).

Should you be paying service charges?

Now, this decision is totally up to you.

No restaurant can force you to pay the service charge, according to the Ministry of Consumer Affairs.

Yes, not even the one where the restaurant has written a 10 per cent service charge on their menu (we generally end up giving the service charge in such cases).

In January 2023, a pub in Bengaluru was ordered to compensate (Rs 500) a customer who forced their consumer to pay a 7.5% service charge.

As per guidelines issued by the Union Ministry of Consumer Affairs, Food and Public Distribution, charging additional service charges to a customer without their express consent amounts to “unfair trade practice”.

But if you really like the service of the restaurant that you’re going to, i.e., the staff behaviour, the environment and even the management, you can pay the restaurant some extra money via the service charge.

How is the service charge different from tips?

The extra money that you hand out to the staff of the restaurants is called a tip.

In India, it is customary to tip, and we generally end up giving cash tips to the staff to express our gratification from the services of the place where we are eating.

Fun Fact: In Japan and China, tipping is not customary, and very uncommon, and some might consider it offensive as well.

Now back to India.

If you’re wondering where your money goes after you tip a particular staff member, or leave that cash on your bill, well, in most cases, the money is collected and divided amongst the staff members, the members of the kitchen, and in most of the restaurants, the management is not a part of this distribution.

For instance, Bharat Gore, the operation manager at We Idliwale Barroom in Pune, tells us that for his restaurant, “all the tips are collected in a box, and at the end of the month it is divided equally amongst the staff.”

The scenario is completely different for service charges for his restaurant, according to Bharat.

“The 7.5 per cent service charge that is collected is divided amongst the staff and other members according to their ‘grades’ [position] they are allotted by the company,” he says.

Sean says, “The service charge, no matter if it is 10 bucks or 100 or 1000 rupees, is a token of appreciation that the customers show towards our staff, and hence, no matter what that is, it makes our staff feel validated and shows that their work is appreciated.”

How digital payments have changed the tipping culture in India

Remember those good old days when we used to go to restaurants, and after paying the bill, we would leave some of the money as a tip?

Today, when the bill arrives, we go to our phones to find the best discounts on third-party apps like Paytm, Google Pay, Swiggy, or Zomato. The point is, due to these third-party apps, consumers end up taking what is the share of the staff, according to the people in the industry.

“People go and pay online, which not only removes the service charge but also then dissipates the tip money they used to pay in leftover cash. The staff have felt the losses,” says Sean.


Both service charges and tipping payments have a great impact on the salaries of the people who work there, and if you want to, and if you can, there’s no harm in paying a little extra to someone who serves you food!

But remember it is an act of generosity, and no one can actually pressurise you to pay that money. 

I am the CEO founder of Page3news worldwide & Page3news foundation. Believe in simple living & high thinking.
Page3news is the first multilingual worldwide newspaper based in Thailand and is making news touch the truth without any fear, without any pressure.

Mr King (Parvinder Singh)
Founder & CEO - Page3News Worldwide
Dr. Monruedee Sommart
Co-Founder Page3news Worldwide

Email : [email protected]