Service Charges : Hidden Implications

In general terms, it is taken that the service charges are actually some kind of compulsory tips. It is not totally wrong, but one must consider other implications as well.

I had earlier experienced, and I am sure that many of you too had experienced, that a bottle of cold drink with MRP of Rs 10, is sold at the road side shops for Rs 12. The shop keepers say that although the MRP of the bottle of the cold drink is Rs 10, they need to keep it in the friz to maintain it’s low temperature, and the cost of refrigeration needs to be recovered.

This is also true for other drinks like Beer. Whatever is the MRP of a beer bottle of a particular brand, it is NEVER available at any bar and/or restaurant at that MRP. Many times, the price charged for a cold beer bottle is two, three or even more times the original MRP of the bottle.

Because the bars and restaurants need to legally sell the bottle at it’s MRP, the difference in the price charged, and the MRP is shown as the Service Charge.

This raises a new question.

Is it legally needed to specify some of the physical conditions of the product to adhere to it’s MRP? (Like temperature in the above example). Then for that product, the concept of MRP is a failure.

Unless the said law is amended to specify the temperatures at which that product can be stored, and then appropriate MRPs to adhere to those different conditions.

Another relevant point is that, many restaurants offer two types of services.

In one type, the customer can choose from the menu card and order as per one’s own choice, so the product is specially made for the customer and is served at his/her table.

Second, the Buffet type, where there are already many dishes prepared and ready, which the customer can choose from and has to follow self service to take the items chosen in his dish to his table.

While in the first type, there is an extra work by the restaurant staff, the other has no such extra work to be done by the restaurant staff.

And yet, the service charges for both the services offered in the same restaurant, are calculated in exactly the same manner.

Therefore, instead of jumping to the conclusion, whether the service charges should be totally banned, one needs to make a detailed study to find whether another laws are applicable, and if so, what is the final solution which can be offered to the customers, while keeping them informed about the charges that shall get applicable, through the Menu Card and other displays the restaurants put up. more