GUWAHATI: The Delhi High Court on Friday, March 28 ruled that service charges and tips are voluntary payments by consumers and cannot be imposed mandatorily by restaurants or hotels.
Justice Prathiba M Singh dismissed petitions filed by the Federation of Hotels and Restaurant Associations of India (FHRAI) and the National Restaurant Association of India (NRAI), which had challenged the 2022 guidelines issued by the Central Consumer Protection Authority (CCPA) prohibiting automatic service charges on food bills.
The Court upheld the guidelines, stating that mandatory collection of service charges is contrary to law. It clarified that while consumers are free to leave voluntary tips, imposing a service charge automatically is misleading, as it may be perceived as a tax or GST, amounting to an unfair trade practice. The Court also imposed costs of ₹ 1 lakh each on the petitioners, to be deposited with the CCPA for consumer welfare.
The Court observed, "The CCPA is an authority empowered to pass the guidelines under CPA 2019. Issuing guidelines is an essential function of CCPA. The same has to be mandatorily complied with."
