Mandatory Service Charge By Restaurants Violates Consumer Law: CCPA Cracks Down As 27 Restaurants Face Action For Adding Service Charge By Default In Bills
From the Editor's Desk
The Central Consumer Protection Authority (CCPA) has initiated suo motu proceedings against 27 restaurants across India, accusing them of violating consumer rights and engaging in “unfair trade practices” under Section 2(47) of the Consumer Protection Act, 2019, over the mandatory imposition of service charges.
The move comes in the wake of a Delhi High Court order dated March 28, 2025, which upheld the CCPA’s guidelines on service charges in hotels and restaurants. In its ruling, the court said that restaurants cannot compel diners to pay a service charge, holding that mandatory collection is not legally permissible. The court also noted that restaurant establishments are bound to follow the CCPA’s framework and affirmed the regulator’s authority to enforce the guidelines in accordance with law.
The CCPA’s “Guidelines to Prevent Unfair Trade Practices and Protection of Consumer Interest with Regard to Levy of Service Charge in Hotels and Restaurants”, issued on July 4, 2022, lay down key conditions for billing practices. These include: restaurants and hotels cannot add a service charge to the bill automatically or by default; the charge cannot be collected under any alternate label; customers must be told clearly that payment is voluntary and optional; establishments cannot deny entry or service to anyone who refuses to pay; and service charge should not be added to the bill in a manner that attracts GST.
According to the authority, investigations found that several establishments were routinely adding a service charge—often 10%—to bills without customer consent. Among the restaurants cited were Café Blue Bottle in Patna and China Gate Restaurant Private Limited (Bora Bora) in Mumbai, which allegedly applied the charge by default, in violation of the Act and the CCPA’s July 2022 guidelines—now affirmed by the Delhi High Court.
The enforcement action was triggered by consumer complaints lodged via the National Consumer Helpline (NCH). The complaints were backed by invoices that, the CCPA said, showed service charges being added as a matter of course. After examining the material, the authority concluded that the practice falls within the definition of an unfair trade practice under Section 2(47) of the 2019 law.
In the case involving Café Blue Bottle, Patna, the CCPA ordered the restaurant to refund the service charge collected from the complainant, stop levying service charges with immediate effect, and pay a penalty of ₹30,000.
For China Gate Restaurant Private Limited (Bora Bora), Mumbai, the service charge amount was refunded during the hearing. The CCPA further directed the company to reconfigure its software-based billing system to remove the default addition of service charge—or any similar charge—imposed automatically. It also imposed a penalty of ₹50,000 for violations related to consumer rights and unfair trade practices and instructed the restaurant to ensure that its publicly listed email address remains active and functional to enable timely consumer grievance redressal, as required under the Act.
Also Read: CCPA Fines China Gate’s Bora Bora Restaurant ₹50,000 For Levying Default Service Charge In Bills
The CCPA said it is continuing to track service charge-related complaints received through the National Consumer Helpline and will take stringent action against restaurants that fail to comply, in a bid to protect consumer interests and curb unfair billing practices.
