Union Consumer Affairs Minister Pralhad Joshi has issued a strong warning to restaurants that continue to levy service charges automatically on customer bills. Establishments found violating consumer protection regulations will face significant penalties and legal action, the minister stated.
This directive follows proactive action by the Central Consumer Protection Authority (CCPA) against 41 restaurants nationwide. These establishments were found to be adding service charges without customers' explicit consent, a practice evidenced by numerous complaints filed through the National Consumer Helpline (NCH) and supporting invoices.
Service Charge is Voluntary, Not Mandatory
In a public statement, Minister Joshi reiterated that service charges are entirely voluntary and at the discretion of the consumer. He confirmed that the CCPA has already imposed fines on violators and directed them to cease the automatic collection of service charges. Restaurants persisting with this practice face stringent measures, including financial penalties and damage to their reputation.
The Ministry of Consumer Affairs noted that the automatic addition of service charges contravenes the guidelines issued in July 2022, which aim to prevent unfair trade practices and safeguard consumer interests regarding charges in hotels and restaurants. Such actions are also deemed an unfair trade practice under Section 2(47) of the Consumer Protection Act, 2019.
CCPA Takes Action Against Violators
The investigation by the CCPA was prompted by consumers submitting bills that clearly showed service charges applied without their prior agreement. The authority has already issued a final order against Chaayos (Sunshine Teahouse Pvt. Ltd.), imposing a ₹50,000 penalty. Chaayos has also been instructed to refund the unlawfully collected service charge to affected customers and modify its billing software to prevent default service charge additions.
Similar final orders have been issued against several other establishments, including Cafe Blue Bottle (Patna), China Gate Restaurant Pvt. Ltd., Fiesta Barbeque Nation, FOO Ahmedabad, L'Opera French Bakery, and Zorro – The Luxury Night Club. Proceedings against additional restaurants are currently ongoing.
Know Your Rights: Key Guidelines
- Restaurants cannot automatically add service charges to food bills.
- Service charges cannot be collected under any alternative name or guise.
- Customers cannot be compelled to pay service charges.
- Restaurants must clearly inform customers that any service charge is optional and voluntary.
- Refusal to pay a service charge cannot result in denial of service or entry.
- Goods and Services Tax (GST) cannot be applied to a service charge amount that has not been voluntarily paid by the consumer.
The Consumer Affairs Ministry strongly urges customers to report any restaurants that continue to impose mandatory service charges. Complaints can be filed via the National Consumer Helpline (1915) or through the NCH platform. The CCPA has affirmed its commitment to continuously monitor complaints and take decisive action against any establishment found in violation of consumer protection laws.