Govt orders these 5 eateries to refund service charge

It's a well known fact that restaurants can levy service charges over and above the bill and Goods and Services Tax (GST) amount. However, this is an optional fee for customer and this service charges have to be removed from the restaurant bill if a customer requests so. Despite this fact, it seems five well known restaurants in Delhi, India have been charging service charges from its customers without their consent and on top of it failed to refund it back to the customers when demanded. This action by these five restaurants violated both the Delhi High Court judgement and Central Consumer Protection Authority guidelines about forcibly collecting service charge from customers dining in a hotel or restaurant.

The government has taken sou moto cognizance of this action by these five restaurants which violated the legal rules, and issued them a notice to immediately refund the service charge amounts to all eligible customers.

Which are the five restaurants which will now refund service charges collected from customers for dining?
“The Central Consumer Protection Authority (CCPA) has taken suo moto action against five restaurants — Makhna Deli, Xero Courtyard, Castle Barbeque, Chaayos, and Fiesta by Barbeque Nation for failing to refund mandatory service charges despite judgment held by Hon’ble High Court of Delhi. Notices have been issued under the Consumer Protection Act, 2019, directing the restaurants to refund the service charge amounts,” according to an PIB Delhi press release dated April 29, 2025.

Why did the government send a notice to these restaurants for refund of service charges collected from customers?
In the press release it was mentioned that the Central Consumer Protection Authority (CCPA) has taken suo moto cognizance against the above mentioned 5 Delhi Restaurants (Makhna Deli, Xero Courtyard, Castle Barbeque, Chaayos, and Fiesta by Barbeque Nation) for non-refund of service charge.

Moreover, the Ministry of Consumer Affairs said that the National Consumer Helpline (NCH) received complaints against restaurants, regarding mandatory levy of service charge and non-refund of service charge amount.

The Ministry of Consumer Affairs also said: “This measure is aimed at reducing the undue pressure on Consumers to pay additional amount at the time of availing services at any Restaurant as no Hotel or Restaurant shall force a consumer to pay Service Charge or Service Charge shall not be collected from consumers by any other name.”

Also read: 18% GST instead of 5% to be charged on dining in a hotel if room rent per night is above this; know how much more it will cost?

Central Consumer Protection Guidelines: No restaurants shall add service charge automatically or by default in the food bill
Central Consumer Protection Authority (CCPA) was established under Section 10 of the Consumer Protection Act, 2019 and on July 4, 2022 they issued certain guidelines. These guidelines aim to curb unfair trade practices and protect consumer interests regarding service charges in hotels and restaurants.

The guidelines stipulate that:

• No hotels or restaurants shall add service charge automatically or by default in the food bill.
• No collection of service charge shall be done by any other name.
• No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer’s discretion.
• No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers.
• Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount.

What did Delhi High Court say about service charge on restaurant bill?
On March 28, 2025, the Delhi High Court upheld the Central Consumer Protection Authority guidelines on service charges. The Ministry of Consumer Affairs said that after this judgement, it came to their notice through complaints received on the National Consumer Helpline (1915), that grievances had been registered alleging that certain restaurants continued to impose a mandatory service charge without obtaining prior consent from consumers, thereby disregarding consumer rights and indulged in unfair trade practices as per the Consumer Protection Act, 2019.