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‘Violative of consumer rights’: Delhi HC on restaurants imposing service charge on food bills
The guidelines were issued in July 2022 for preventing unfair trade practices and violation of consumer rights concerning levying service charge.
The Delhi high court on Friday upheld the guidelines issued by the Central Consumer Protection Authority (CCPA), prohibiting hotels and restaurants from automatically levying a'service charge' on food bills.
The guidelines were issued in July 2022 for preventing unfair trade practices and violation of consumer rights concerning levying service charges.
The high court said that the imposition of a service charge in a mandatory manner is “violative of consumer rights and the collection of service charge in various names amounts to unfair trade practices.”
“The registrants should not add the service charge mandatorily but must leave it to the consumer’s discretion,” the court added.
Justice Prathiba M Singh pronounced the judgement and dismissed petitions of restaurant bodies challenging CCPA guidelines prohibiting hotels and restaurants from levying mandatory service charges on food bills.
According to a PTI report, the Federation of Hotels and Restaurant Associations of India (FHRAI) and National Restaurant Association of India moved court in 2022 by filing two separate petitions.
The guidelines, issued by Central Consumer Protection Authority on July 4, 2022, were stayed by the high court later that month.
On March 9, the FHRAI pitched for delinking the GST on food & beverage services from accommodation charges in hotels, PTI reported.
Citing multiple representations made to the authorities, FHRAI emphasized that the current practice of linking F&B taxation to hotel room tariffs is both unfair and operationally challenging for the hospitality industry.
Under the prevailing GST framework, restaurants within hotels charging ₹7,500 or more per room per day are subject to 18 per cent GST on F&B services with input tax credit (ITC) benefits, while those in hotels with tariffs below this threshold must levy 5 per cent GST without ITC.
FHRAI has proposed a flexible system allowing all hotel restaurants to independently opt for either 18 per cent GST with ITC or 5 per cent without ITC, irrespective of the room rates.
