The Centre reaffirmed that restaurants across India cannot levy mandatory service charges, calling it a violation of consumer protection laws. The Consumer Affairs Ministry and CCPA cited court-backed guidelines and ordered outlets like Barbeque Nation to stop unfair billing practices
NEW DELHI: The Centre has clarified that restaurants throughout India are prohibited from imposing a mandatory service charge on food bills, emphasizing that such practices infringe upon consumer protection laws.
The Ministry of Consumer Affairs highlighted that the Central Consumer Protection Authority (CCPA) has already taken action against various establishments that automatically included this charge, despite existing guidelines and a Delhi High Court ruling that supports the ban.
As part of its enforcement efforts, Barbeque Nation received a directive to cease collecting service charges after a complaint indicated an extra fee had been included in its bill.
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According to the CCPA, a compulsory service charge constitutes an unfair trade practice under the Consumer Protection Act, 2019. The authority’s guidelines expressly forbid restaurants from adding this charge by default, collecting it under different names, or pressuring customers into paying.
The Delhi High Court reaffirmed these guidelines in March 2025, stating that customers should not be compelled to accept a service charge on their bills. It is also mandated that any service charge be clearly labeled as voluntary and optional.
Key points from the guidelines include:
- No hotel or restaurant shall add a service charge automatically.
- No service charge shall be collected using a different name.
- Refusing to pay cannot lead to a denial of service.
- GST cannot be applied to such charges if they have been added unlawfully.
The CCPA has levied penalties against 27 restaurants that continued to impose default service charges. Inspections revealed that some establishments were adding a flat ten percent to bills without customer consent and, in many cases, charging GST on that amount. Following complaints received through the National Consumer Helpline, these penalized restaurants have been instructed to refund the charges and eliminate automatic additions from their billing systems.
In several cities, enforcement teams discovered that restaurants persisted in this practice despite the 2025 court ruling. Officials stated that further action would be taken if these establishments do not comply.
Barbeque Nation Hospitality Ltd was directed to stop imposing the service charge following a customer complaint filed in March 2025 regarding an additional fee of Rs 335. According to the CCPA order reviewed by Mint, the company initially offered to apply the charge toward a future bill but later provided a full refund after the issue was escalated. This case has been marked as a clear precedent for other restaurant chains.
Previously, enforcement action had also been taken against China Gate Restaurant Private Limited in Mumbai for defaulting a ten percent charge on all bills and applying GST on it, in violation of the guidelines and the court ruling.
Under the current regulations, consumers have the right to:
- Request the removal of any service charge added without their consent.
- Refuse to pay the charge entirely.
- File complaints with the National Consumer Helpline if restaurants persist in this practice.
- Receive a refund for any service charge that was added automatically.
Officials have urged customers to report any violations, enabling follow-up actions against repeat offenders.