Mandatory Restaurant Service Charge Declared Illegal: What Diners Need To Know
Mandatory Restaurant Service Charge Declared Illegal: What Diners Need To Know
Delhi High Court backs CCPA guidelines, confirming service charge is voluntary and restaurants cannot force customers to pay.
Dining out in India may soon become a more transparent experience for consumers, with the government reiterating that restaurants cannot impose a compulsory service charge on customers. In a major relief for diners and travellers, the Central Consumer Protection Authority (CCPA) has stated that mandatory service charges amount to an unfair trade practice under the Consumer Protection Act, 2019.
The move follows sustained consumer complaints about restaurants automatically adding service charges to bills and pressuring customers to pay them, often without clear disclosure.
The Delhi High Court has upheld the CCPA’s guidelines, confirming that restaurants cannot force diners to accept a service charge as part of their bill. The court also observed that the consumer authority is empowered to enforce penalties against establishments that violate these rules.
The CCPA’s guidelines, issued on July 4, 2022, clearly prohibit restaurants from levying service charge by default. Under the rules, restaurants cannot add the charge automatically or collect it under any alternative name. Customers must not be pressured or misled into paying, and establishments are required to inform diners that any service charge is purely voluntary and optional.
Importantly, restaurants cannot deny entry or refuse service if a customer chooses not to pay a service charge. The guidelines also specify that service charge must not be added to the bill and then taxed under GST, ensuring that consumers are not burdened with additional charges on top of an already disputed fee.
Acting on multiple complaints received through the National Consumer Helpline, the CCPA has taken suo motu cognisance of the issue and imposed penalties on 27 restaurants across India for unfair trade practices under Section 2(47) of the Consumer Protection Act.
Several well-known outlets, including China Gate, Bora Bora and Cafe Blue Bottle, were fined between Rs 30,000 and Rs 50,000 for adding a mandatory 10% service charge to customer bills. Authorities also directed these restaurants to refund the full amount collected, stop the practice immediately, and remove default service charge options from their billing systems.
For diners, the ruling strengthens consumer rights while eating out, whether at home or while travelling. Customers can now refuse to pay any service charge without fear of harassment or denial of service. Any violations can be reported through the National Consumer Helpline, and the CCPA has confirmed that it will continue monitoring complaints and taking strict action against establishments that flout consumer protection laws.
