Stop Paying Extra: Your Legal Rights on Service Charge in Restaurants

When you pay your restaurant bill, the last thing you want is confusion about extra charges. Finance influencer CA Jay Desai breaks down a key clarification many Indians still don't know: service charge is voluntary and not mandatory. This clarity comes straight from the Delhi High Court's 2023 guidelines on fair trade practices, which reaffirm that customers cannot be forced to pay a service charge, no matter what a restaurant's bill, menu, or signage says.

What the Delhi High Court Clarified About Service Charge:

In September 2023, the Delhi High Court issued an important observation: restaurants are allowed to levy a service charge, but customers are free to decline paying it. This means a restaurant cannot:

• Add a service charge and claim it is compulsory
• Deny service if a customer refuses to pay
• Mislead customers into believing the charge is a government‑mandated fee

The judgment reinforced that a service charge is simply a voluntary payment, nothing more than a token of appreciation for good service.

Your Rights as a Customer:

Jay Desai emphasizes that consumers should be aware of their rights before blindly following. Here are the essentials:

1. You can refuse to pay the service charge

Even if the restaurant has printed it on their menu, placed a signboard, or added it to your bill, you are not obliged to pay for it. You can ask for it to be removed politely.

2. You can choose to pay if you're satisfied

If you genuinely liked the hospitality, ambience, or service, feel free to pay the service charge. It often goes toward staff welfare. The key is choice.

3. GST must not be calculated on the service charge

Restaurants sometimes add GST on top of the service charge. That is incorrect. GST should only be calculated on the value of food and beverages, excluding service charge.

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Why This Matters for Your Wallet

A service charge typically ranges from 5–10%. On large group bills, that can add up quickly. Knowing your rights ensures you're not paying extra simply because it was “added automatically.”

Jay Desai encourages diners to stay informed, question unexplained charges, and make conscious decisions that protect their money, without compromising courtesy.