Upward rounding off of retail bills: Overcharging or a matter of convenience?

The concept of rounding off 50 paise and above to the next higher rupee, put in practice by retail businesses, has not found favour with consumers. So for several years now, consumers have been questioning this practice and many consumers have sought justice before the consumer courts, accusing businesses of overcharging.

What’s now added to the indignation of consumers is an order of the apex consumer court, holding that such method of doing away with fractions neither constitutes an unfair trade practice nor is it a deficient service. Of course, this is not the final word on the issue because the National Consumer Disputes Redressal Commission in this case did not examine the practice per se, but confined itself to the question of quantum of compensation awarded by the lower consumer courts on such a complaint.

Why should there be so much fuss over adding 50 paise to a bill , one may well ask. Well, individually, it does seem like a small amount, but to a business, it adds up to a huge profit and to consumers as a class, the loss is substantial. Businesses point out that they do round off fractions below 50 paise downwards to the nearest rupee and only fractions of 50 paise and above, upwards. So consumers do not pay if the bill has a fraction of less than 50 paise and pay a rupee only if it is 50 paise or more.

But consumers are not convinced. Besides, there is no data to show that the gain to consumers from such downward rounding off is equal to the loss from upward rounding off. Also, going by consumer complaints, some businesses have tweaked their billing software to round off all fractions, whatever the amount, upwards to the nearest rupee.

The concept of rounding off fractions of a rupee was first introduced by the Reserve Bank in 1991 for banking transactions. Subsequently, as 50 paise coins more or less disappeared (it is still legal tender), retail businesses also adopted it in their billing . However, this has annoyed consumers.

Perhaps one of the first complaints on this issue that went up to the level of the apex consumer court was filed in 2012 by consumer Shyam Joshi, questioning McDonald Family Restaurant charging ₹53, instead of ₹52.50. The lower consumer courts awarded ₹4,500 and paise 50 to the consumer and the apex consumer court refused to entertain the revision petition of the restaurant on the ground that the amount involved was too paltry.

The Delhi high court, before which the restaurant challenged this, also disposed it off with a similar comment. However, the court said none of the orders of the consumer courts in this case shall form a precedence. (WP 4713 of 2015, order dated Feb 8, 2016).

This issue came up again before the National Commission in 2016 in the form of a revision petition filed by the same restaurant, challenging the orders of the lower consumer courts in Rajasthan. The commission disposed them all through a common order of July 26, 2021, the lead case being M/s Mcdonald Family Restaurant vs Nisha Goyal (RP No 1246 of 2016) and held that the restaurant need not pay any compensation as there was no unfair trade practice or deficiency in service on its part in rounding off a bill of ₹85.50 to ₹86.

Admittedly, fractions are inconvenient, more so in the absence of 50 paise coins. But are consumers bearing the brunt of RBI’s decision not to mint 50 paise coins? The commission needs to examine this.

Also in its order of July 26, the commission basically looked at the notifications issued by the RBI on the issue, but these were meant for banks and non-banking financial companies. In fact, whether it is the circulars issued by RBI or SEBI, or laws passed under Central Goods and Services Act ( Section 170) or Income Tax Act (Section 288 B), they are all meant specifically for those sectors and not for retail business.

On the other hand, the Legal Metrology (Packaged Commodities) Rules, that regulate retail sale of packed goods in the country, says that packages must mention maximum retail price inclusive of all taxes “after taking into account the fraction of less than 50 paise to be rounded off to the preceding rupee and fraction of above 50 paise and up to 95 paise to be rounded off to 50 paise”. So this is very different from what the RBI says to banks.

It is also important to note that with the digital push given by the government, we have moved considerably away from cash payments. Much more than credit and debit cards, today mobile wallets have gained extreme popularity and are accepted by even roadside vendors. So the excuse of the disappearing 50 paise does not hold good.