The Central Consumer Protection Authority (CCPA) has imposed a ₹1 lakh penalty on Mister Chai, a restaurant at Shangri-La Eros Hotel in New Delhi, for automatically adding a 10% service charge to customers’ bills without their consent. In an order dated October 22, 2026, the consumer watchdog ruled that making customers request the removal of the charge did not make the payment voluntary.
The action followed complaints about the practice, which the authority considered an unfair trade practice under consumer protection law. The CCPA directed the restaurant to stop levying service charges by default, including under other names, and submit a compliance report within 15 days of receiving the order.
Responding to the development, the hotel said it had discontinued service charges across all its dining outlets and services from October 1, 2026, following a review of its billing practices.
Complaints Prompt Action
The CCPA’s action followed consumer complaints dated May 30 and June 10, 2025, concerning the automatic addition of a 10% service charge at Mister Chai. The authority examined the bills submitted by the complainants and initiated an investigation into the restaurant’s billing practices.
According to the findings reported in connection with the order, one bill dated May 30, 2025, showed a service charge of ₹435 on a subtotal of ₹4,350. Another bill, dated June 10, 2025, included a service charge of ₹125 on a subtotal of ₹1,250. The bills also reflected Goods and Services Tax (GST) calculated on the increased amounts, adding to the final sums customers were asked to pay.
The hotel maintained that the charge was discretionary and that its menu informed customers that they could request a waiver. It also argued that customers could refuse the charge before making payment or seek a refund afterwards. The restaurant subsequently changed the description of the levy to “Charges for Voluntary Service Staff Contribution (Optional)”.
However, the CCPA rejected the argument that describing the charge as optional or allowing customers to request its removal made the practice lawful. It held that automatically including the amount in the bill placed the responsibility on customers to identify and challenge the charge, rather than allowing them to decide freely whether to pay it.
The authority also took note of the hotel’s submission that the disputed amount had been refunded to the complainant. However, it said that a refund did not erase the underlying violation. The restaurant was directed to discontinue the automatic levy, refrain from collecting it under any other name and comply with the existing consumer protection guidelines. The ₹1 lakh penalty was imposed in view of the violations identified by the authority.
What Rules Say
The CCPA issued its guidelines on service charges in hotels and restaurants on July 4, 2022, to prevent unfair trade practices and protect consumers from being compelled to pay additional amounts beyond the listed prices and applicable taxes.
Under these guidelines, restaurants and hotels cannot automatically add a service charge to customers’ bills. They are also prohibited from collecting the charge under another name or forcing customers to pay it. Consumers must be clearly informed that any such payment is voluntary, optional and entirely at their discretion. Businesses cannot deny entry or refuse service because a customer declines to pay a service charge.
The guidelines also prohibit restaurants from adding a service charge to the bill and then levying GST on the combined amount. The rules distinguish between a compulsory levy and a voluntary tip or gratuity that customers may choose to give after assessing the service they received.
The Delhi High Court upheld the CCPA’s guidelines on March 28, 2025, reinforcing that restaurants must follow the rules and that the authority can enforce them in accordance with the law. The ruling was significant because it clarified that restaurants cannot make payment compulsory by incorporating the charge into their standard billing process.
In the present case, the CCPA found that an arrangement requiring customers to ask for a waiver was effectively an “opt-out” system. Instead of giving diners a genuine choice before the charge was imposed, it required them to take additional steps to have it removed. The authority held that displaying information about the charge on a menu or bill did not resolve this problem.
Responding to the penalty, a Shangri-La Eros New Delhi spokesperson said the management had reviewed its billing practices and discontinued service charges across all hotel services from October 1, 2026. The spokesperson said the hotel remained committed to transparent billing and that guests’ bills would reflect the items ordered and applicable government-mandated taxes. The hotel has therefore said it has changed its billing practices, while the CCPA’s order requires compliance with the guidelines and submission of a report within the stipulated period.
The Logical Indian’s Perspective
The CCPA’s action highlights the importance of transparent billing and informed consumer choice. While service charges can recognise the efforts of restaurant staff, customers should be free to decide whether to pay them. Clear communication and adherence to consumer protection rules can help build trust between businesses and customers. Do you think current service-charge guidelines adequately protect consumers?
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