Why in news
The issue of service charges in restaurants has been in court for three years.
The case is being heard in the Delhi High Court.
Consumer rights groups (like Central Consumer Protection Authority (CCPA)) and restaurant associations are on opposite sides.
What is the issue?
Restaurants often add a 5% to 20% service charge to bills.
The key question: Is this charge fair business or unfair to customers?
In July 2022, the CCPA banned automatic service charges.
Restaurant groups challenged this, saying it’s been a long-standing industry practice.
Critics argue that tips should be voluntary — after the meal — based on service quality.
A 1958 committee also said tips should be voluntary, not forced.
What is the consumer perspective?
Customers feel it’s unfair when a hidden service charge is added at the end of the meal.
Complaints to the National Consumer Helpline say restaurants often refuse to remove it.
In 2016, the Consumer Affairs Ministry said service charges are optional.
In 2022, stricter CCPA guidelines banned automatic or hidden service charges.
Restaurants cannot rename or disguise the service charge either.
What do restaurant associations say?
National Restaurants Association of India (NRAI) and Federation of Hotels and Restaurants Association of India (FHRAI) argue service charges are a norm for over 80 years.
They say no law bans it outright.
They also claim it helps fairly distribute tips among staff and is part of staff wage agreements.
What have the courts said so far?
In July 2022, the Delhi High Court allowed restaurants to add service charges only if clearly shown on the menu.
On March 28, 2024, the court said service charges or tips must be voluntary, not mandatory.
A new appeal has been filed against this decision — the matter is still ongoing.
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