15/04/2025
The Central Consumer Protection Authority (CCPA) issued guidelines on 04-07-2022, prohibiting restaurants and hotels from automatically adding a “service charge” to consumer bills. This charge, typically 5-20%, was often presented as a mandatory tip, further attracting GST, increasing the financial burden on consumers. The guidelines clarified that service charges must be optional, cannot be a condition for entry, and cannot be collected under any other name. However, these guidelines were challenged in two writ petitions, one by the National Restaurants Association of India (NRAI) and another by the Federation of Hotels and Restaurants Association of India (FHRAI) seeking their quashing on the grounds that service charges had been a standard industry practice for decades and that CCPA lacked the authority to issue such directives.
Delhi High Court In the case : National Restaurant Association of India (NRAI) Vs Union of India
The Court held that all restaurant establishments would have to adhere to the guidelines passed by the CCPA. If there is any violation of the same, action would be liable to be taken in accordance with law. CCPA is free to enforce its guidelines in accordance with law. Thus, the Court dismissed the writ petitions with costs of Rs.1 lakh each to be deposited with Central Consumer Protection Authority to be utilized for consumer welfare.
