The Ministry of Consumer Affairs, Food & Public Distribution, vide press release dated 10 January 2026 (4:05 PM), issued by PIB Delhi, has clarified that the mandatory levy of service charge by restaurants constitutes an unfair trade practice under the Consumer Protection Act, 2019.
Pursuant to the said clarification, the Central Consumer Protection Authority (CCPA) has taken suo motu cognizance against 27 restaurants across the country for violation of consumer rights and adoption of unfair trade practices within the meaning of Section 2(47) of the Consumer Protection Act, 2019, in relation to compulsory collection of service charge.
The action follows the judgment of the Hon’ble Delhi High Court dated 28 March 2025 in the matter National Restaurant Association of India & Ors. v. Union of India & Anr., W.P.(C) 10683/2022 & W.P.(C) 10867/2022; Neutral Citation: 2025:DHC:2084 (Delhi High Court, 28 March 2025), wherein the Court upheld the CCPA Guidelines on Levy of Service Charge and categorically held that mandatory collection of service charge by restaurants is contrary to law. The Court further observed that all restaurant establishments are bound to comply with the said Guidelines and affirmed that the CCPA is fully empowered to enforce them.
The Court Concluded that
1. The CCPA is the authority fully empowered and has the jurisdiction to pass the guidelines under the CPA, 2019. In fact, issuing guidelines in consumer interest is an essential function of CCPA under Section 18(2)(l) of the CPA, 2019. The said guidelines would have to be mandatorily complied with as the scheme of the Act clearly provides for enforcement of guidelines;
2. The guidelines issued by the CCPA would not curtail fundamental rights under Article 19(1)(g) in any manner in view of the discussion above as the guidelines are in the larger interest of the consumers and have been issued in accordance with law;
3. Service charge or TIP as is colloquially referred, is a voluntary payment by the customer. It cannot be compulsory or mandatory. The practice undertaken by the restaurant establishments of collecting service charge that too on a mandatory basis, in a coercive manner, would be contrary to consumer interest and is violative of consumer rights;
4. The collection of service charge and use of different terminologies for the said charge is misleading and deceptive in nature. The same constitutes an unfair trade practice under Section 2(47) of the CPA, 2019;
5. The justification being given on behalf of the Petitioners for collection of service charge, that they are part of labour settlements and agreements with staff, is not supported by any material on record and the same is accordingly rejected;
6. The fact that service charge can be collected as it is part of a voluntary contract/agreement made by the consumer who enters the establishment and avails of the services after seeing the chargeability of service charge on the menu card is an argument which is not tenable as such a condition is onerous and constitutes an unfair contractual condition under Section 2(46) of the CPA, 2019;
7. Consumer rights cannot be subjugated to an argument that a contract is being entered into by the consumer while entering the establishment to pay service charge as the payment and collection of service charge is itself contrary to law;
8. While this Court holds that the mandatory collection of service charge is contrary to law and violates the guidelines, it is also of the opinion that if consumers wish to pay any voluntary Tip for services which they had enjoyed, the same would obviously not be barred. The amount however, ought not to be added by default in the bill/invoice and should be left to the customer’s discretion.
9. The CCPA may consider permitting change in the nomenclature for Service Charge which is nothing but a ‘Tip or a gratuity or a voluntary contribution’. Terminology such as ‘voluntary contribution’, ‘staff contribution’, ‘staff welfare fund’ or similar terminology can be permitted. The use of the word ‘service charge’ is misleading as consumers tend to confuse the same with service tax or GST or some other tax which is imposed and collected by the government.
The Court further held that The guidelines framed by the CCPA are thus valid and are in the interest of the consumers and the same are upheld. All restaurant establishments would have to adhere to the guidelines passed by the CCPA. If there is any violation of the same, action would be liable to be taken in accordance with law. CCPA is free to enforce its guidelines in accordance with law.
The Guidelines to Prevent Unfair Trade Practices and Protection of Consumer Interest with Regard to Levy of Service Charge in Hotels and Restaurants, issued by the CCPA on 4 July 2022, inter alia, provide that:
- No hotel or restaurant shall add service charge automatically or by default in the food bill;
- No service charge shall be collected by any other name;
- Consumers shall not be forced to pay service charge and must be clearly informed that it is voluntary and optional;
- No restriction on entry or provision of services shall be imposed on consumers refusing to pay service charge; and
- Service charge shall not be added to the bill or subjected to GST.
Investigations revealed that several restaurants, including Café Blue Bottle, Patna, and China Gate Restaurant Private Limited (Bora Bora), Mumbai, were automatically levying a 10% service charge by default, in clear violation of the Consumer Protection Act, 2019 and the CCPA Guidelines.
The proceedings were initiated based on complaints received through the National Consumer Helpline (NCH), supported by invoices evidencing default addition of service charge. Upon investigation, the CCPA held that such conduct amounts to an unfair trade practice under Section 2(47) of the Act.
In the case of Café Blue Bottle, Patna, the CCPA directed the restaurant to:
- Refund the entire service charge collected from the consumer;
- Discontinue the practice of levying service charge with immediate effect; and
- Pay a penalty of ₹30,000.
In the case of China Gate Restaurant Private Limited (Bora Bora), Mumbai, while the service charge was refunded during the hearing, the CCPA further directed the restaurant to:
- Modify its software-generated billing system to remove default addition of service charge or any similar charge;
- Pay a penalty of ₹50,000 for violation of consumer rights and unfair trade practices; and
- Ensure that its publicly available email ID remains active and functional at all times for effective consumer grievance redressal.
The CCPA has reiterated that it will continue to closely monitor complaints received on the National Consumer Helpline and take strict action against non-compliant restaurants to safeguard consumer rights and curb unfair trade practices.
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RELATED PRESS RELEASE:
Ministry of Consumer Affairs, Food & Public Distribution
Mandatory Levy of Service Charge by Restaurants Violates Consumer Law: CCPA
Automatic Addition of Service Charge Declared Unfair Trade Practice
Penalties imposed up to ₹50,000; restaurants directed to refund service charge and modify billing systems
Action triggered by consumer complaints on National Consumer Helpline (NCH) supported by invoices
Posted On: 10 JAN 2026 4:05PM by PIB Delhi
The Central Consumer Protection Authority (CCPA) has taken suo motu cognizance against 27 restaurants located across the country for violation of consumer rights and adoption of unfair trade practices under Section 2(47) of the Consumer Protection Act, 2019, relating to the mandatory levy of service charge.
The action follows the judgment of the Hon’ble High Court of Delhi dated 28 March 2025, which upheld the Guidelines issued by CCPA on levy of service charge. The Court held that mandatory collection of service charge by restaurants is contrary to law and observed that all restaurant establishments are required to adhere to the CCPA guidelines. The Court further affirmed that CCPA is fully empowered to enforce its guidelines in accordance with law.
The Guidelines to Prevent Unfair Trade Practices and Protection of Consumer Interest with Regard to Levy of Service Charge in Hotels and Restaurants, issued by CCPA on 4 July 2022, stipulate that:
- No hotel or restaurant shall add service charge automatically or by default in the food bill
- No service charge shall be collected by any other name
- Consumers shall not be forced to pay service charge and must be clearly informed that it is voluntary and optional
- No restriction on entry or provision of services shall be imposed based on refusal to pay service charge
- Service charge shall not be added to the bill and subjected to GST
Investigations revealed that several restaurants, including Café Blue Bottle, Patna, and China Gate Restaurant Private Limited (Bora Bora), Mumbai, were automatically levying a 10% service charge by default, in clear violation of the Consumer Protection Act, 2019 and the CCPA Guidelines, which have now been upheld by the Hon’ble High Court of Delhi.
The action was initiated based on complaints received on the National Consumer Helpline (NCH), supported by invoices clearly reflecting default addition of service charge. A detailed investigation established that such practices amount to Unfair Trade Practice under Section 2(47) of the Act.
In the case of Café Blue Bottle, Patna, the CCPA directed the restaurant to:
- Refund the full amount of service charge to the consumer
- Discontinue the practice of levying service charge with immediate effect
- Pay a penalty of ₹30,000
In the case of China Gate Restaurant Private Limited (Bora Bora), Mumbai, the restaurant refunded the service charge during the hearing. The CCPA further directed the restaurant to:
- Modify its software-generated billing system to remove default addition of service charge or any similar charge
- Pay a penalty of ₹50,000 for violation of consumer rights and unfair trade practice
- Ensure that its email ID available on public platforms remains active and functional at all times for effective consumer grievance redressal, as mandated under the Act
The Central Consumer Protection Authority is closely monitoring complaints received on the National Consumer Helpline regarding levy of service charge and will continue to take strict action against non-compliant restaurants to safeguard consumer rights and prevent unfair trade practices.
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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the author whatsoever and the content is to be used strictly for informational and educational purposes. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. the author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.
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