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Delhi High Court allowed restaurants to levy service charges on food bills till August 31. It comes just two days after the HC asked restaurants why they cannot increase the salaries of their staff instead of levying a service charge.
The bench consisting of chief justice Satish Chandra Sharma and justice Subramonium Prasad issued notice to restaurant bodies against the stay granted by a single judge bench on the guidelines barring restaurants from charging the tax, according to a report by Financial Express (FE).
"They can price their food at any rate, but it is being felt by customers that this service charge is levied by the government and they feel embarrassed if they don't pay it," additional solicitor general Chetan Sharma said in the court, according to FE.
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Kapil Sibal, appearing for restaurant associations, argued that these taxes had been levied for 70 years and the collections go to the staff only. He further said that the restaurants pay GST on the service charge and the TDS on the money paid to the staff.
According to the guidelines by CCPA, hotels and restaurants are prohibited from collecting service charges by any other name. It was aimed to prevent unfair trade practices, the FE report said.
On July 20, a single-judge bench headed by justice Verma put a stay on the CCPA guidelines. It directed the restaurants to display the information regarding the levy of service charges on the menu cards. The bench also prohibited collecting the charge on takeaway orders.
CCPA said that the stay was against "natural justice", and the guidelines were issued only after receiving customer complaints.
Delhi HC has asked its Registry to list the petition before its single-judge Bench of Justice Yashwant Varma immediately after ten days, FE reported.
