Luxury restaurant in Delhi fined Rs 1 lakh for levying 10% service charge by default

The authority observed that requiring customers to request a waiver effectively shifted the burden onto them to avoid paying a charge that should have been voluntary. According to The Indian Express, the order was passed on October 22 by CCPA chief commissioner Nidhi Khare and commissioner Anupam Mishra after two complaints alleged that the restaurant had automatically levied a 10% service charge on customers' bills.

"When a restaurant displays prices on its menu, a component of service is already inherent in the pricing of the food and beverages offered," the authority observed, adding that customers should be informed of the actual cost upfront. The CCPA further said that a service charge should not be added by default to a bill or invoice, as a tip or service charge is a voluntary payment at the customer's discretion.

65L Two complaints trigger CCPA investigation The case arose from two complaints alleging that the restaurant had imposed a 10% service charge on food bills dated May 30, 2025, and June 10, 2025. Following an initial inquiry, the CCPA found that the restaurant had levied the charge on the bills. Since the billing system was software-generated, the authority observed that the practice could potentially affect a larger number of customers, making it a suitable case for action on behalf of consumers.

The CCPA issued a notice to the restaurant on July 28, 2025, seeking an explanation. In its response, the restaurant maintained that its menu clearly stated that a service charge was levied but was discretionary and could be removed on request. It denied forcing customers to pay the charge or misleading them about its nature. The restaurant also argued that customers had sufficient opportunity to decline the charge before or after paying their bills.

Restaurant's 'optional' charge defence rejected During the proceedings, advocate Vidhi Goel, appearing for the restaurant, submitted that staff verbally asked customers whether they were comfortable paying the service charge. The restaurant also said it had revised its billing format to describe the levy as "Voluntary Service Staff Contribution (Optional)". It further assured the authority that it would comply with the relevant guidelines and remove the service charge across its branches.

However, the detailed investigation found that automatically including the charge could exert undue pressure on customers and mislead them into believing that payment was compulsory. The CCPA rejected the argument that describing the charge as optional was sufficient to establish free consumer choice. It noted that keeping the charge embedded in the billing software by default created an opt-out mechanism rather than requiring customers to actively opt in.

In effect, customers had to take additional steps to get the charge removed, placing the burden on them rather than leaving the decision to pay a tip or service charge entirely to their discretion. It also held that mentioning the optional nature of the charge on the menu did not address the problem when the billing system continued to add it automatically. The CCPA concluded that the practice amounted to an unfair trade practice, misleading advertisement and a violation of consumer rights.

The restaurant was fined Rs 1 lakh and directed to discontinue the automatic or default imposition of service charges, including under any other name. Takeaway The order reinforces the distinction between a voluntary tip and a charge automatically included in a restaurant bill. Customers should check their bills for service charges and can question a levy that has been added by default.