Service charge crackdown: What the government's action means for diners

The government has stepped up action against restaurants that add service charges by default. The move signals stricter enforcement after court backing and consumer complaints.The warning comes as the Central Consumer Protection Authority (CCPA) expands enforcement against restaurants accused of automatically adding service charges to customers' bills. The government has stepped up its crackdown on restaurants that continue to levy mandatory service charges, with Consumer Affairs Minister Pralhad Joshi warning that establishments flouting the rules will face penalties and reputational consequences.The warning comes as the Central Consumer Protection Authority (CCPA) expands enforcement against restaurants accused of automatically adding service charges to customers' bills. The regulator has initiated suo motu action against 41 restaurants across the country after receiving complaints through the National Consumer Helpline.According to the CCPA, several establishments were found to be adding service charges by default without obtaining customers' consent or giving them the option to refuse the levy. The latest action marks a shift from issuing guidelines to actively enforcing consumer protection rules.For many diners, however, the announcement raises an obvious question: Wasn't service charge always legal? The answer is no—or at least, not in the way it has often appeared on restaurant bills.The confusion stems from the fact that service charges have been routinely added to bills for years, leading many customers to believe they are compulsory. In reality, the dispute has been playing out for several years, with the government consistently maintaining that restaurants cannot impose such charges as a mandatory levy. The issue first came to the fore in July 2022, when the CCPA issued guidelines stating that restaurants cannot automatically add a service charge to food bills. The regulator argued that forcing customers to pay such charges amounts to an unfair trade practice under the Consumer Protection Act because diners are only legally required to pay the price of the food, applicable taxes and other charges specifically authorised by law.Restaurant associations challenged those guidelines before the Delhi High Court, arguing that service charges were part of their business model and that customers were informed about them in advance. However, in March 2025, the High Court upheld the CCPA's guidelines, ruling that restaurants cannot impose service charges as a default levy.The judgment effectively removed the legal uncertainty surrounding the issue and cleared the way for stricter enforcement.That enforcement is now becoming visible.Earlier this year, the CCPA initiated action against dozens of restaurants, directing some establishments to refund consumers, modify their billing software and stop automatically adding service charges to bills.The latest round expands that drive to 41 restaurants, signalling that the regulator intends to pursue complaints more aggressively.The government has also stressed that its action is not against tipping. Customers remain free to leave a tip or voluntarily pay a service charge if they are satisfied with the service.What restaurants cannot do is add the charge automatically, present it as mandatory, refuse service if a customer declines to pay it, or collect it under another name. The regulator has also clarified that GST cannot be levied on a mandatory service charge.For consumers, the takeaway is simple. If a restaurant bill includes an automatic service charge, customers can ask for it to be removed.If the restaurant refuses, they can lodge a complaint through the National Consumer Helpline, which has formed the basis for the CCPA's latest enforcement action.The government's latest warning, therefore, is more than just another advisory. It signals that the government has entered a new phase of enforcement, with restaurants that continue to impose mandatory service charges likely to face greater scrutiny and regulatory action.- EndsPublished By: Koustav DasPublished On: Jul 20, 2026 09:26 IST