Consumer Affairs Secretary Rohit Kumar Singh said that consumers get confused between service charges and service tax and end up paying extra money on their orders.

The minister noted that levying service charges is patently arbitrary and constitutes an unfair as well as restrictive trade practice under the Consumer Protection Act.

Here's a breakout of charges and taxes you pay on your restaurant bill:

A restaurant bill comprises the cost of food items (usually mentioned on the menu), service charge, and a 5% GST on food services including takeaway facility. The GST is 18% if a restaurant is located inside a hotel wherein the room rate is upwards of ₹7,500.

While the Centre has made GST mandatory, it is the service charges that are optional.

However, there have been many instances wherein the restaurants have forced customers to pay service charges despite the latter's disapproval.

What the restaurants say on service charges

National Restaurant Association of India (NRAI) and the Federation of Hotel & Restaurant Associations of India (FHRAI) said that levying service charges was not illegal.

"The service charge is transparent, worker-friendly, and is also recognized by many judicial orders which have been shared with the department. In addition, the government also earns revenue from the service charge as tax is paid by restaurants on the same," NRAI President Kabir Suri said.

The association explained that a service charge, like any other charge collected by an establishment, is part of the invitation offered by the restaurant to potential customers. It is for customers to decide whether they wish to patronise the restaurant or not, FHRAI said in a separate statement.

Difference between service charge and service tax

Service tax is a government levied tax. It is the tax levied on the service provider but eventually is borne by the customers utilising that particular service.

While service charge is a kinda 'forced tip' that diners pay, sometimes without their consent.

What do restaurants do with service charges?

A major chunk of service charges goes to staff. Restaurants pay salaries to staff but service charges work as an incentive for them.

"... a service charge is meant for the benefit of the staff and so, some establishments make a conscious choice to adopt a policy beneficial towards its staff members. Levying service charges is a general practice adopted across the globe. It is neither illegal nor violating any law," FHRAI Vice President Gurbaxish Singh Kohli said.