CCPA cracks down on service charges: Restaurants asked to remove automatic billing levy

Dining out could soon come with fewer billing surprises as the Centre intensifies its crackdown on restaurants that continue to levy mandatory service charges. Union Consumer Affairs Minister Pralhad Joshi has issued a stern warning to establishments across the country, making it clear that those who persist with the practice risk not only financial penalties but also damage to their reputation.

The minister noted that the issue has become increasingly common in major cities such as Delhi, Mumbai and Bengaluru. Recalling his own experience, Joshi said he recently noticed a service charge being added to the bill at a Bengaluru restaurant. According to him, the amount was removed after his companions questioned it, following which the restaurant apologised.

He also urged restaurants to update their billing systems if service charges or similar levies are being added automatically to invoices.

Among the businesses facing action is Chaayos (Sunshine Teahouse Pvt Ltd), which has been fined Rs 50,000. The CCPA has also directed the company to refund the service charge collected from the complainant and modify its software-generated billing system across all outlets to ensure the charge is no longer added automatically..

Final orders have also been passed against Cafe Blue Bottle in Patna, China Gate Restaurant Pvt Ltd, Fiesta Barbeque Nation (Barbeque Nation Hospitality Pvt Ltd), FOO Ahmedabad Restaurant (Pebble Street Hospitality Pvt Ltd), L'Opéra French Bakery Pvt Ltd, and Zorro – The Luxury Night Club (Rudra Hospitality Pvt Ltd). The ministry said proceedings against other restaurants are still underway.

The current crackdown is backed by a Delhi High Court ruling delivered in March last year, which upheld the validity of the CCPA's 2022 guidelines. The court affirmed that restaurants cannot impose mandatory service charges and recognised the consumer authority's power to enforce the rules.

The guidelines, first notified in July 2022, clearly state that restaurants cannot add a service charge by default or disguise it under another name. They also prohibit establishments from forcing customers to pay the charge, denying service to those who refuse to pay it, clubbing it with the food bill, or charging GST on the service charge itself.

Joshi reiterated that customers should understand the distinction between a voluntary tip and a mandatory service charge.

As per Joshi, there is a clear distinction between a voluntary tip paid by a customer and a mandatory service charge imposed by a restaurant and the latter is not permissible under the law.

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