Mandatory Service Charge Declared Illegal: CCPA Penalizes Restaurants Across India

On 10-1-2026, the Central Consumer Authority (CCPA) took suo moto action against 27 restaurants across India for mandatorily levying service charges, declaring the practice an unfair trade practice under Section 2(47) of the Consumer Protection Act, 2019.

Background:

This action follows the Delhi High Court judgment in National Restaurant Association of India v. UOI 2025 SCC OnLine Del 1975, decided on 28-3-2025. The Court upheld the CCPA’s guidelines on service charges, ruling that their mandatory collection is unlawful. It further affirmed the CCPA’s authority to enforce compliance under the Consumer Protection Act, 2019.

Read more: Delhi High Court upholds CCPA Guidelines.

Key Takeaways:

1. To prevent unfair trade practices in hotels and restaurants, CCPA had issued guidelines on 4-7-2022.

2. The CCPA Guidelines stated:

   • No hotel or restaurant shall add service charge automatically or by default in the food bill.

   • Service charge cannot be collected under any other name.

   • Consumers must be informed that payment of service charge is voluntary and optional.

   • No restriction on entry or service provision can be imposed for refusal to pay service charge.

   • Service charge cannot be added to the bill and subjected to GST.

3. There were complaints made on the National Consumer Helpline (‘NCH’), supported by invoices showing automatic addition of service charge, that triggered this Action

4. Investigations revealed that several restaurants, that included Café Blue Bottle (Patna) and China Gate Restaurant Pvt. Ltd. (Bora Bora, Mumbai), specificallly, were found to be automatically levying a 10% service charge by default, violating both the Act and CCPA guidelines.

5. On 13-11-2025, the CCPA imposed the following on Café Blue Bottle, Patna¹:

   ○ Refund full-service charge to the consumer.

   ○ Discontinue the practice immediately.

   ○ Pay a penalty of ₹30,000.

6. On 29-12-2025, the CCPA imposed the following on China Gate Restaurant Pvt. Ltd., Mumbai²:

   ○ Refund service charge during the hearing.

   ○ Modify billing software to remove default service charge.

   ○ Pay a penalty of ₹50,000.

   ○ Ensure active email ID for consumer grievance redressal as mandated under the Act.

7. By penalizing violators and enforcing compliance, the CCPA has reinforced that consumer rights cannot be compromised and hidden charges have no place in India’s hospitality sector.