Mandatory levy of service charge by restaurants violates consumer law: Ministry

New Delhi: The Union Ministry of Consumer Affairs, Food & Public Distribution on Saturday said mandatory levy of service charge by restaurants violates consumer law. 

The Central Consumer Protection Authority (CCPA), under the Ministry said that automatic addition of service charge declared as unfair trade practice and it invites penalties. 

The 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, said the statement. 

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 service charge shall be collected by any other name and 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 and service charge shall not be added to the bill and subjected to GST, " the statement said. 

"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 statement said.