The Ministry of Consumer Affairs, Food & Public Distribution, through a press release dated 10 January 2026, has reaffirmed that compulsory levy of service charge by restaurants amounts to an unfair trade practice under the Consumer Protection Act, 2019. Acting on this clarification, the Central Consumer Protection Authority (CCPA) has initiated suo motu proceedings against 27 restaurants across India for violating consumer rights by automatically adding service charges to bills.

This enforcement action follows the landmark judgment of the Delhi High Court dated 28 March 2025 in National Restaurant Association of India v. Union of India, where the Court upheld the CCPA Guidelines on Levy of Service Charge (4 July 2022). The Court categorically ruled that service charge or tip is purely voluntary and cannot be imposed by default or through coercive billing practices. Any mandatory collection—irrespective of nomenclature—was held to be illegal, misleading, and violative of consumer rights.

The Court further clarified that:

• The CCPA has full statutory authority under the Consumer Protection Act, 2019 to issue and enforce such guidelines.
• These guidelines do not infringe the right to trade under Article 19(1)(g) of the Constitution.
• Displaying service charge on menu cards does not amount to consumer consent, as such conditions are unfair and one-sided.
• Service charge cannot be justified on the basis of staff wage arrangements or internal labour agreements.
• Adding service charge by default, or under alternate labels, constitutes an unfair trade practice and unfair contract.

Importantly, while consumers are free to leave a voluntary tip or gratuity if they wish, such amounts must not be automatically included in the bill, nor should refusal to pay result in denial of service or discrimination. Service charge is also not subject to GST.

Based on consumer complaints received via the National Consumer Helpline (NCH), the CCPA has already imposed penalties of up to ₹50,000, directed full refunds of illegally collected service charges, and ordered restaurants to modify billing software to eliminate default additions. Establishments have also been instructed to maintain active grievance-redressal contact details.

The CCPA has made it clear that strict monitoring will continue, and any restaurant found violating the guidelines will face enforcement action to ensure transparency, fairness, and protection of consumer interests.