The Managing Directors/CEO’s/Directors/Partners/General Managers
All FHRAI Members
CC: All Members of the Executive Committee
All Regional Associations
President FHRAI
Sub: Advisory on Compliance with CCPA Guidelines Regarding Service Charge and Customer Tips
Dear Members,
As you are aware that FHRAI had challenged the circular dated 04.07.2022, issued by the Central Consumer Protection Authority (CCPA), on the issue of levy of service charge by the hospitality establishments, before the Hon’ble High Court of Delhi.
The Hon’ble High Court, vide its judgment dated 28.03.2025, dismissed the petition filed by FHRAI and in its order upheld the validity as well as the binding nature of the guidelines issued by the CCPA. The Hon’ble Court ruled that service charge cannot be levied on a mandatory basis and must remain a voluntary payment to be made at the sole discretion of the customer. It has further been clarified that such charge cannot be automatically added to the bill, and that customers are at liberty to leave a tip voluntarily.
Excerpts from the order of the Hon’ble High Court is given as under.
“Service charge or TIP, as is colloquially referred, is a voluntary payment by the customer. It cannot be compulsory or mandatory. The practice undertaken by restaurant establishments of collecting service charge, that too on a mandatory basis, in a coercive manner, would be contrary to consumer interest and is violative of consumer rights.”
“All restaurant establishments shall adhere to the guidelines issued by the CCPA. In the event of any violation thereof, action shall be liable to be taken in accordance with law. The CCPA shall be at liberty to enforce its guidelines in accordance with law.”
Members are also hereby once again informed that FHRAI had challenged the above said order of the High Court before the Division Bench of the Delhi High Court, which is pending adjudication before the Hon’ble Division Bench.
We had informed the members earlier and reiterate that all members must comply and act in accordance with the law. Accordingly, all member hotels and restaurants are advised not to levy service charges on a mandatory basis in customer bills or collect them under any other name. However, customers may choose to give a voluntary tip at their discretion.
A link to access the copy of the judgement is given below:
FHRAI vs. CCPA order dated 28.03.2025
We will update you about any further development on this subject.
With best regards,
________________________________________________
The Federation of Hotel & Restaurant Associations of India
Regd. Office: B-82, 8th Floor, Himalaya House, 23 K.G. Marg, New Delhi - 110 001
Tel.: 011-40780780, E-mail: fhrai@fhrai.com, Website: www.fhrai.com