CCPA Issues Fresh Warning on Mandatory Restaurant Service Charges
The Central Consumer Protection Authority (CCPA) has intensified its crackdown on restaurants imposing mandatory service charges, declaring such practices as unfair trade under the Consumer Protection Act, 2019. Based in Bengaluru, the authority has warned that unilateral levying of these charges can attract penalties of up to Rs 50,000, following a surge in nationwide complaints.
Directive Emphasizes Consumer Choice and Transparency
In a recent directive, the CCPA clarified that service charges must remain optional and voluntary, with diners retaining the right to refuse any such addition to their bills without prior consent. The authority has initiated suo motu proceedings against 27 restaurants across India and reprimanded a major food chain on February 4 for non-compliance.
According to the CCPA, actions were prompted by complaints filed through the National Consumer Helpline, supported by invoice evidence showing mandatory charges. The authority cited Section 2(47) of the Consumer Protection Act, 2019, to classify these practices as unfair, stressing that consumers should not face compulsion in tipping.
Industry Response and Legal Challenges
Hotel associations have indicated compliance with the directive while hinting at potential legal battles. GK Shetty, president of the Karnataka State Hotels Association, defended the practice, stating that a 5% service charge was introduced to "fairly share tips" among all staff, from kitchen to front desk, unlike cash tips that typically benefit individual employees.
Shetty argued, "Globally, 10%–20% service charges are common. We kept it at 5%. The Rs 50,000 penalty is a heavy burden amid rising costs. The charge is removed if a guest objects. We are planning to write to the government, seeking suitable modifications."
PM Ananth Narayan, head of the Bengaluru chapter of the National Restaurant Association of India (NRAI), criticized the scrutiny, noting, "When governments levy multiple layers of taxes, cesses, and surcharges, it is accepted as policy. When ride-hailing, delivery, and aggregator platforms actively prompt customers for tips, it is celebrated. When restaurants introduce a clearly disclosed, modest service charge, it becomes questionable. NRAI is contesting the issue in court."
Consumer Perspectives and Experiences
Many consumers have welcomed the CCPA's move, advocating for tips based on service quality rather than obligation. US Mahendra, founder of coffee chain Hatti Kaapi, supported optional charges, calling the penalty clause "harsh" and suggesting government notifications or posters to clarify voluntariness.
Customer testimonials highlight varied experiences:
- Mrinmoyee Roy, a third-year BSc student from SG Palya, said, "Restaurants do remove service charges on request. Tips are a personal choice; automatically added service charges are undesirable. If diners don't enquire, then charges stay on the bill."
- Devaprana Gosh, a 22-year-old second-year MA student, shared, "Last year, our bill came to around Rs 9,000, with Rs 700 added as service charge, which was high. We sought its removal, and the restaurant politely suggested paying 25%, which we gladly did. Later, another restaurant refused to remove the charge. Shocking was when my friend saw bills with notes that said 'not to ask for a waiver'. It's up to the customer to tip. Compulsory charges could spoil the mood."
- Pavan Kumar, a 32-year-old businessman from Rajajinagar, noted, "Many customers are hesitant to seek removal of charge for multiple reasons. Now, it's up to the customers. This encourages better accountability from restaurants."
Key Guidelines from CCPA
The CCPA has outlined strict guidelines to protect consumer rights:
- No hotel or restaurant shall add service charge automatically to food bills.
- Service charges shall not be collected under any other name.
- Consumers must be clearly informed that the charge is voluntary and optional.
- No restrictions on entry or service provision based on refusal to pay the charge.
- Service charges shall not be included in bills or subjected to GST.
This crackdown aims to enhance transparency and fairness in the dining industry, empowering consumers to make informed choices without undue pressure.
