Delhi High Court Rules Restaurants Cannot Impose Mandatory Service Charges
NEW DELHI, March 28 – The Delhi High Court ruled on Friday that restaurants and hotels cannot enforce mandatory service charges on food bills, upholding a government directive that makes such charges voluntary.
Justice Prathiba M. Singh rejected petitions filed by restaurant associations challenging the 2022 guidelines issued by the Central Consumer Protection Authority (CCPA), which prohibit businesses from automatically adding service charges or misrepresenting them under different names.
“The imposition of mandatory service charges constitutes an unfair trade practice,” the court said, emphasizing that consumers should have the choice to pay or withhold the fee.
The court also imposed a ₹1 lakh ($1,200) fine on restaurant associations that contested the guidelines, affirming the CCPA’s authority under the Consumer Protection Act, 2019, to regulate unfair trade practices and protect consumer rights.
The ruling clarified that restaurants cannot impose service charges as a condition for dining, nor can they include such fees in bills and tax them under the Goods and Services Tax (GST) framework.
Restaurant associations had argued that the guidelines were unfair and should not be treated as binding regulations. However, the court dismissed their objections, stating that mandatory service charges could mislead customers into believing they were paying a government-imposed tax.
The decision reinforces the consumer’s right to decide on tipping, marking a significant victory for regulatory efforts to prevent deceptive billing practices.
