Mandatory service charge by restaurants illegal: CCPA takes action against 27 establishments

The Central Consumer Protection Authority (CCPA) has taken suo motu action against 27 restaurants across the country for mandatorily levying service charges on food bills, terming the practice a violation of consumer rights and an unfair trade practice under the Consumer Protection Act, 2019.

The action follows a March 28, 2025 judgment of the Delhi High Court, which upheld the CCPA’s 2022 guidelines on service charges and ruled that compulsory collection of such charges by restaurants is contrary to law. The court also affirmed the authority of the CCPA to enforce these guidelines.

According to the CCPA, investigations revealed that several restaurants were automatically adding service charges, typically around 10 per cent, to customer bills by default. This practice was found to be in clear violation of Section 2(47) of the Consumer Protection Act, which defines unfair trade practices.

The cases were initiated after consumers lodged complaints with the National Consumer Helpline (NCH), supported by invoices showing the automatic addition of service charges. Based on these complaints, the CCPA conducted detailed inquiries and imposed penalties ranging up to Rs 50,000, besides directing refunds and corrective measures.

Among the establishments proceeded against was Café Blue Bottle in Patna, which was directed to refund the full service charge amount to the complainant, immediately discontinue the practice, and pay a penalty of Rs 30,000.

In another case, China Gate Restaurant Private Limited (Bora Bora) in Mumbai refunded the service charge during the hearing. The restaurant was further directed to modify its billing software to remove any default service charge, pay a penalty of Rs 50,000, and ensure that its publicly listed email ID remains active for consumer grievance redressal.

The CCPA reiterated that, under its guidelines issued on July 4, 2022, restaurants cannot automatically add service charges to bills, cannot collect such charges under any other name, and must clearly inform customers that payment of service charge is voluntary. The guidelines also prohibit denial of service to consumers who refuse to pay the charge and bar the inclusion of service charge in bills for the purpose of levying GST.

The authority said it is closely monitoring complaints received through the National Consumer Helpline and will continue to take strict action against restaurants found violating consumer protection laws to safeguard consumer interests.