The Delhi High Court ruled on Friday that restaurants and hotels cannot force customers to pay service charges on food bills. The court said that paying service charges should be voluntary, not mandatory, as making them compulsory is an unfair trade practice.

Justice Prathiba M Singh gave this decision while rejecting petitions from restaurant associations. These associations had challenged the Central Consumer Protection Authority's (CCPA) guidelines, which ban hotels and restaurants from adding mandatory service charges to food bills.

The High Court upheld the 2022 guidelines issued by the Central Consumer Protection Authority (CCPA), stating that restaurants cannot automatically add service charges to food bills or disguise them under any other name. The court also imposed a ₹1 lakh fine on restaurant associations that challenged these guidelines.

The court clarified that the CCPA is not just an advisory body but has the authority to prevent unfair trade practices and protect consumer rights. According to the guidelines, hotels and restaurants cannot force customers to pay service charges and must inform them that it is entirely voluntary.

The Central Consumer Protection Authority (CCPA) has made it clear that restaurants cannot impose service charges as a condition for entry or service. Also, service charges cannot be added to the bill and taxed under GST, as reported by Bar and Bench.

The Delhi High Court also dismissed objections to these guidelines, stating that the CCPA has full authority under the Consumer Protection Act, 2019, to issue such rules, which must be followed.

The court also noted that automatically adding service charges can mislead customers into believing they are paying a government tax like GST.

However, restaurant associations argued that the guidelines were unfair and should not be considered legally binding government orders.

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