While dining out, you may have noticed that many restaurants add a 10% service charge, which some people might be okay with if the meal is good. But if the experience isn’t great, that charge can feel unfair. Recently, the Indian government made it clear that restaurants can’t force service charges because it goes against consumer rights. This means tipping is completely up to the customer.
The Ministry of Consumer Affairs revealed that the Central Consumer Protection Authority (CCPA) has taken action against numerous restaurants for automatically including this charge. This follows a Delhi High Court ruling that supports the prohibition of such charges. Barbeque Nation has been instructed to stop the automatic addition of service charges. This decision follows a complaint regarding an extra fee on its bills.
Under the Consumer Protection Act of 2019, the CCPA deems the implementation of a compulsory service charge as an unfair trade practice. The authority’s guidelines clearly state that restaurants cannot automatically include such charges or use any alternative names for them, nor can they pressure customers into paying. The Delhi High Court reinforced these guidelines in March 2025, reaffirming that customers have the right to refuse service charge payments. Restaurants must communicate that any service charge is voluntary and optional.
Mandatory Service Charge Declared Illegal: What Should You Know
– Restaurants cannot automatically include a service charge.
– No charge can be labeled under a different name.
– Customers cannot be denied service for refusing to pay the charge.
– GST should not be applied to any unlawfully added charges.
The CCPA has acted on its own initiative against 27 restaurants nationwide for violating consumer rights regarding the mandatory service charge. Investigations have found establishments like Café Blue Bottle in Patna and China Gate Restaurant in Mumbai illegally charging a 10% service fee by default, which violates both the Consumer Protection Act and CCPA guidelines upheld by the Delhi High Court.
Complaints lodged via the National Consumer Helpline (NCH) led to this investigation, revealing that such practices constitute unfair trading.
In the case of Café Blue Bottle, the CCPA ordered the restaurant to do the following
– Refund the entire service charge amount to consumers.
– Stop collecting service charges immediately.
– Pay a fine of INR 30,000.
Similarly, for China Gate Restaurant, which refunded the service charge during hearings, the CCPA instructed them to:
– Adjust their billing system to eliminate automatic service charges.
– Pay an INR 50,000 penalty for consumer rights violations.
– Maintain an active email address for consumer complaints, as required by the law.
The CCPA will continue to monitor complaints regarding service charges. It will take stringent action against restaurants that do not comply, aiming to protect consumer rights and eliminate unfair practices.
What You Should Know Now:
Under the current regulations, consumers hold the right to:
– Demand the removal of any unsolicited service charges.
– Refuse to pay such charges entirely.
– Report any ongoing issues to the National Consumer Helpline.
– Receive refunds for any automatically added service charges.
