The game of water: Pay extra to hotels or remain thirsty

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No, beta, we can’t have more water today. We have already spent double of our water budget for the day,” replied the mother of a 10-year-boy who was repeatedly asking for water.

This was meant to be their best vacation ever as they had been planning for it for the last three years. Little did they know that all these years of savings, which were meant to buy an extra two-night stay in the hotel, would be spent on buying mineral water bottles.

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For a long time, it was understood that a hotel or restaurant could not charge you more than the MRP of a water bottle. But the recent order of the Supreme Court came as a major blow to consumers when it allowed hotels to charge more than the actual MRP of the bottled water.

The apex court held that hotels and restaurants are not bound by the maximum retail price (MRP) when they sell bottled mineral water and packaged food items. The Ministry of Consumer Affairs had earlier said that overcharging for pre-packed or prepackaged products was an offence under the Legal Metrology Act.

“Sale of packaged water over MRP by hotels and restaurants may have implications regarding tax evasion as a bottle purchased by a hotel at cost price, which should be sold at MRP or less, is being sold at much higher prices, leading to possible loss of additional revenue to the government in the form of service tax or excise duty etc.,” the government had said.

Favouring hotels in its judgment on a special leave petition filed by the Federation of Hotel and Restaurant Associations of India against the Union of India, the apex court ruled that while selling food and drinks, hotels
and restaurants also deliver services, making it a composite transaction with composite billing, so MRP rates cannot be insisted upon for such entities.

What was the government’s appeal?

Early this year, Ram Vilas Paswan, Union Minister for Food and Consumer Affairs, had posted multiple tweets about receiving several complaints about different prices being charged for packaged water in different places.

“Mineral water bottle will be available at the same rate at airports, hotels and malls,” he had tweeted.

In 2016, the minister had asked consumers to lodge a complaint if packaged drinking water was sold above the MRP at any location including hotels, cinemas and airports.

In its affidavit against Federation of Hotel and Restaurant Associations of India (FHRAI), the government had said that:

Charging more than the MRP for pre-packaged or pre-packed products in hotels and restaurants was an offence under the Legal Metrology Act;

Selling bottled mineral water above MRP would attract monetary penalties and jail terms for the management personnel of hotels and restaurants;

Overcharging for pre-packed or packaged products was an offence under the Legal Metrology Act that could attract a fine of 25,000 or a jail term;

“Sale of packaged water over MRP by hotels and restaurants may have implications regarding tax evasion as a bottle purchased by a hotel at cost price, which should be sold at MRP or less, is being sold at much higher prices, leading to possible loss of additional revenue to the government in the form of service tax or excise duty,” it said.

Supreme Court’s decision

The Supreme Court rejected the government’s argument; Justice Rohinton Nariman, while heading the bench, said provisions of the law will not apply to hotels and restaurants;

These establishments cannot be prosecuted for selling such items above the MRP;

“It is not a case of simple sale. Nobody goes to a hotel to buy or take away a bottle of mineral water,” the bench observed.

FHRAI’s response

The Federation of Hotel and Restaurant Associations of India (FHRAI) had filed a special leave petition against the Union of India and the decision came in their favour.

“We had moved the Supreme Court and had said that nobody comes to hotels just for bottled water or a cold drink – there are other costs involved. So, we cannot sell at the printed price. There is a service that is rendered. Our stand has been accepted by the court and the act doesn’t cover us and we are not bound to sell our items on MRP,” said Garish Oberoi, president of the FHRAI.

While the issue has been a subject of intense debate since 2003, the Supreme Court’s decision has given a setback to the consumers for whom water could be the last thing for which they would ever like to pay anything more than the MRP.

Inspired to earn more with the latest order of the Supreme Court, Yashica Jalhotra has become a proud owner of a hotel and tries to make people aware of how necessary is water for sustaining life.

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