What is legal basis for service charge?


THE EDITOR: As we strive to ensure value for money and that restaurants in particular provide good service, many patrons may not fully comprehend the imposition of a service charge on bills and how this item is measured and indeed what can be done if one does not get good service.

In the vast majority of restaurants, the price of the line items for food and drink are stated without taking into account the service charge and VAT, which can often be a rude awakening when you have to pay.

There is also the allied question of whether to add a tip in cash or as part of a credit card transaction when it is also unclear whether staff benefit from the service charge and whether staff actually get the tip if included as part of a credit card transaction.

Arguably, as part of the contractual arrangement when you seek to patronise a restaurant, such an establishment should always declare up front that a service charge and VAT will be added to the final bill but many do not.

While one recognises that VAT is imposed through legislation, it is unclear on what legal basis a service charge is imposed and how this is quantified and accounted for in the ledgers maintained by restaurants and other such establishments.

Such charges, which often prove to be very significant in terms of the overall cost of dining out, should be properly justified and accounted for and arguably they are not at present, leaving many patrons puzzled and sometimes shocked at the total size of the bill when the items ordered seem in themselves not entirely unreasonable.

Moreover, if patrons take the service charge into account, many may be tempted not to leave a tip or gratuity which many waiting staff are highly dependent upon to amplify their basic salary.

It is high time that those responsible for regulating financial and consumer affairs as well as labour intervene to protect patrons and employees of such establishments being taken advantage of, as well as issuing guidelines when such charges may not be justified where poor service is given.


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