Rs 435 on Rs 4350: Shangri-La Eros Delhi fined Rs 1 lakh for adding 10% service charge to food bills automatically; CCPA says customers cannot be forced to request its removal

Central Consumer Protection Authority (CCPA) has imposed a penalty of Rs 1 lakh on Shangri-La Eros, New Delhi, for automatically adding a 10% service charge to restaurant bills, holding that describing the levy as optional on the menu does not make the practice lawful.

In its October 22, 2026 order, the consumer regulator found that the hotel continued levying the charge despite guidelines prohibiting restaurants from adding service charges automatically or by default. The authority said customers must be free to decide whether to leave a tip, without having to request the removal of a charge already included in their bills.

Why CCPA fined Shangri-La Eros Delhi

The case arose from consumer grievances dated May 30 and June 10, 2025, concerning the hotel's Mister Chai restaurant. Customers alleged that a 10% service charge had been added to their food bills.

Following a preliminary inquiry, the CCPA issued a notice to the restaurant on July 28, 2025, seeking an explanation for the alleged violation of consumer protection provisions and its 2022 guidelines on service charges in hotels and restaurants.

The regulator subsequently ordered a detailed investigation. The Director General (Investigation) submitted its report on June 5, 2026, concluding that the automatic levy amounted to an unfair trade practice and violated consumer rights.

After examining the investigation report and the restaurant's submissions, CCPA held that the billing practice created an opt-out system, requiring customers to actively object to the charge instead of allowing them to choose whether to pay it in the first place.

How much service charge was added to the bills?

The investigation examined invoices showing a 10% service charge on the food subtotal, followed by the calculation of GST.

One invoice dated May 30, 2025, showed a subtotal of Rs 4,350 and a service charge of Rs 435. Central GST and state GST of Rs 430.65 each were then added, taking the total bill to Rs 5,646.

Another invoice showed a subtotal of Rs 1,250, a service charge of Rs 125, and CGST and SGST of Rs 123.75 each. The final bill amounted to Rs 1,623.

CCPA said automatically adding the charge created a financial burden on customers without recorded, explicit consent. It also observed that calculating GST on the additional charge increased the amount payable.

What Shangri-La Eros said in its defence

Shangri-La Eros denied compelling customers to pay the service charge. It argued that Mister Chai's menu clearly stated that the charge was discretionary and could be waived at the customer's request.

The hotel maintained that customers were informed about the charge before their bills were issued and that staff sought their consent. It also said diners could request its removal before payment or seek a refund afterwards.

The restaurant offered to refund Rs 560 to the complainant towards the service charge and associated GST. In its subsequent submission, it informed CCPA that the refund had been processed on August 28, 2026.

The hotel also changed the wording on its menu and invoices, replacing the service charge description with terms such as "Voluntary Service Staff Contribution (Optional)". It argued that the revised wording made the voluntary nature of the payment clearer.

The restaurant further submitted that it operated three restaurants under Shangri-La Eros: Tamra, Shang Palace and Mister Chai, with Sorrento and Grappa also mentioned in its submission. It said it was in the process of stopping the collection of the contribution, with the change to take effect from October 1, 2026.

Why the optional label did not satisfy CCPA

The regulator rejected the argument that menu disclosures, verbal consent or the possibility of obtaining a refund justified the billing practice.

According to CCPA, the hotel's own explanation that customers had time to refuse the charge supported its finding that the billing process placed the responsibility on diners to opt out.

The authority also rejected the renaming of the levy as a voluntary staff contribution. Its 2022 guidelines state that service charges cannot be collected under another name. CCPA said the revised description did not resolve the underlying problem if the charge continued to be embedded in the billing system by default.

The regulator observed that customers may feel uncomfortable challenging a charge at the payment counter. Merely stating on a menu that a charge can be waived on request does not establish free and informed consent when the amount is automatically included in the bill.

It held that the practice violated consumer rights under Section 2(9) of the Consumer Protection Act, 2019, and constituted misleading representation and an unfair trade practice under the relevant provisions of the law.

Delhi High Court had upheld service charge guidelines

CCPA referred to the Delhi High Court's March 28, 2025, judgment in National Restaurant Association of India and others v Union of India and another.

The High Court upheld CCPA's 2022 guidelines, holding that a service charge or tip must remain voluntary and cannot be made compulsory. It also said restaurants must not add such charges by default to bills or invoices.

The guidelines prohibit restaurants from automatically adding service charges, collecting them under another name, restricting entry or service because a customer refuses to pay, or collecting the charge along with the food bill and levying GST on the combined amount.

CCPA said Shangri-La Eros continued the practice until October 1, 2026, despite the guidelines and the High Court judgment. It observed that the hotel discontinued the levy only after the regulator had taken up the matter.

What the CCPA has ordered

The authority directed Shangri-La Eros to discontinue and refrain from automatically adding or collecting any service charge, whether under that name or another description. It ordered the restaurant to comply strictly with the 2022 guidelines.

CCPA imposed a penalty of Rs 1 lakh after considering the investigation findings, the restaurant's submissions and the statutory factors relevant to determining the penalty.

Shangri-La Eros must submit a compliance report to the authority within 15 days of receiving the order.

The order reinforces the distinction between a voluntary tip and a charge included in the bill by default. Customers may choose to reward service, but restaurants cannot make diners responsible for identifying and removing an automatically added levy.