Service Charge By Default? Shangri-La’s Mister Chai Gets Rs 1 Lakh Reality Check

Can a restaurant add a service charge to your bill and expect you to ask for its removal if you do not want to pay? The Central Consumer Protection Authority (CCPA) has made its position clear: customers must not have to opt out of a charge they never agreed to in the first place.

The regulator has imposed a penalty of Rs 1 lakh on Mister Chai, a restaurant at Shangri-La Eros New Delhi, for automatically adding a 10 per cent service charge to food bills. In its October 22 order, the CCPA directed the restaurant to stop collecting service charge by default or under any other name. It must also submit a compliance report within 15 days of receiving the order.

Two Bills Caught The Regulator’s Attention

The CCPA’s investigation centred on two customer complaints filed in May and June 2025, both alleging that Mister Chai had added a 10 per cent service charge to their bills without their consent.

In the first case, a bill dated May 30, 2025, included a service charge of Rs 435 on a subtotal of Rs 4,350. With CGST and SGST of Rs 430.65 each. Another bill, dated June 10, showed a service charge of Rs 125 on a subtotal of Rs 1,250. After CGST and SGST of Rs 123.75 each, the bill totalled Rs 1,623.

In both cases, the bills contained no recorded evidence that customers had voluntarily agreed to pay the service charge.

Waiver Argument Failed

Mister Chai had argued that customers could request a waiver at the payment counter. The regulator rejected this defence, pointing out that its July 2022 guidelines prohibit hotels and restaurants from adding service charges automatically.

The restaurant had also described the charge as optional on its menu, with customers able to seek a waiver. But the CCPA found that this put the onus on diners to refuse payment rather than allowing them to decide freely whether to tip.

Changing the levy’s name to “Charges for Voluntary Service Staff Contribution (optional)” did not help either. The guidelines prohibit collecting service charges under any other name. A refund after payment also could not undo the violation, as consent must be free and informed when the bill is raised.

Service Charges Discontinued From October

The CCPA noted that the Delhi High Court, in its March 28, 2025, judgment, had upheld the applicability of the regulator’s guidelines and allowed their enforcement in accordance to law.

The authority held that the practice violated provisions of the Consumer Protection Act, 2019, relating to consumer rights, misleading representations, unfair contracts and unfair trade practices.