Indian authorities have stepped up enforcement against restaurants that automatically add service charges to customer bills without clear consent, reaffirming that such practice is illegal under consumer protection laws. The Central Consumer Protection Authority (CCPA) and related legal rulings make it clear that service charges must be voluntary, and diners cannot be forced to pay them as a default fee.
Why Mandatory Service Charges Are Illegal
The current legal framework considers automatic or compulsory service charges an unfair trade practice. Restaurants are prohibited from:
- Adding service charges by default on bills.
- Collecting these charges under any other label.
- Requiring payment as a condition for service or entry.
- Charging GST on such unlawful fees added without consent.
These rules aim to protect consumer rights and ensure transparency in pricing when dining out.
Action Taken Against Restaurants
In a recent enforcement drive, authorities identified 27 outlets across India that continued to impose default service charges. These restaurants were ordered to refund the amounts collectedremove the automatic charge from their billing systems, and comply with the voluntary nature of service fees.
Among establishments pulled up was a major chain that faced scrutiny following customer complaints about automatic charges on bills, prompting regulatory intervention and mandatory corrective measures.
Diners’ Rights Clearly Defined
Under the enforced guidelines:
- Service charge must be presented as optional and clearly communicated to diners.
- Customers have the right to refuse the service charge with no penalty or denial of service.
- If unlawfully added, the charge must be removed and refunded.
Restaurants must also revise billing software and point-of-sale systems to ensure compliance with the rules.
Broader Impact on the Dining Industry
The crackdown reinforces the principle that pricing must be transparent and consensual. While service charges are common in many dining bills, the legal stance emphasises that only optional, agreed-upon fees are permitted.
For consumers, this means greater control over their bills and protection from surprise charges. For restaurants, it underscores the importance of complying with consumer protection laws in everyday operations.
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