Government warns restaurants and hotels against levying unlawful service charges
The government on Wednesday warned that action will be taken against all restaurants and hotels across India that automatically add a service charge to customers'
The government on Wednesday warned that action will be taken against all restaurants and hotels across India that automatically add a service charge to customers' bills, following a surge in complaints. The Department of Consumer Affairs said the practice is unlawful under Delhi High Court orders and Central Consumer Protection Authority (CCPA) guidelines, and clarified that tipping remains voluntary. In a video shared by PTI on X, Nidhi Khare, Secretary of the Department of Consumer Affairs, said the department had received numerous consumer reports on the issue. She cited the Delhi High Court's ruling that held that restaurants and hotels levying mandatory service charges will face action.
Khare stressed that the problem arises when the service charge is automatically built into the invoice, a practice she considers “settled” after last year's judgment. Also Read | Delhi High Court to pass interim order for takedown of infringing content in Yuvraj Singh personality rights suit Speaking to media persons on the sidelines of the ‘FICCI MASSMERIZE 2026 Retail, FMCG, and E-commerce Conference’ in Delhi today, she said any complaints that do come in would be forwarded to the relevant department for action. "We're getting a lot of complaints on service charge," she said, revealing that more than 60 notices have been issued to hotels and restaurants over the practice, reported ANI.
On 28 March 2025, Justice Prathibha M Singh of the Delhi High Court dismissed petitions by the Restaurant Association of India and the Federation of Hotels and Restaurant Associations of India challenging the Central Consumer Protection Authority's 2022 guidelines. According to Business Standard, the court held that mandatory service charges misled consumers by resembling a tax and thus constituted an unfair trade practice. Ruling that consumer rights take precedence over restaurant interests, the petitioners were ordered to pay ₹1 lakh each towards consumer welfare. Consumer rights over seller preferences The Central Consumer Protection Authority, or CCPA, chaired by Khare, recently penalised ‘Chaayos’ ₹50,000 after it described the service charge as voluntary while automatically adding it to the bill, reported The Times of India.
The authority has also taken action against various other Delhi restaurants for failing to refund the charge. The CCPA's 2022 guidelines have made it illegal for bars, hotels and restaurants to add a service charge by default and require them to make it clear to all paying customers that any such payment is optional and at their discretion. Also Read | Delhi CM cancels Dwarka medical store permit for denying medicines
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