the essay of 21 January 2026 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=utf-8"> </head> <body bgcolor="#FFFFFF"> <p><strong><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif" size="2">JANAUARY 21, 2026</font></strong></p> <p align="center"><font color="#FF6633" face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong> Mandatory Generosity - With GST! </strong></font></p> <p align="center"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong><u>By Vijay Kumar </u></strong></font></p> <p align="justify"><strong><font face="Verdana, Arial, Helvetica, sans-serif" size="2">EVER</font></strong><font face="Verdana, Arial, Helvetica, sans-serif" size="2"> stared at a restaurant bill like you're deciphering hieroglyphs? There's the food, GST, and the mysterious "service charge" staring back at you - begging the question, are you tipping the waiter or funding their retirement plan? And somewhere between the soup and the samosa, you're left wondering if you've accidentally signed up for a pension scheme. </font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Look at a Sample Bill of a Restaurant</font></p> <div><table align="center" border="1" cellpadding="3" cellspacing="0" style="width:90%"> <tbody> <tr> <td align="justify" style="vertical-align:top"> </td> <td style="vertical-align:top"> <div align="justify" style="float:right"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong>Rs </strong></font></div> </td> </tr> <tr> <td align="justify" style="vertical-align:top"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Food Bill </font></td> <td style="vertical-align:top"> <div align="justify" style="float:right"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">5000 </font></div> </td> </tr> <tr> <td align="justify" style="vertical-align:top"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Service Charge (10%) </font></td> <td style="vertical-align:top"> <div align="justify" style="float:right"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">500 </font></div> </td> </tr> <tr> <td align="justify" style="vertical-align:top"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">GST (18%) </font></td> <td style="vertical-align:top"> <div align="justify" style="float:right"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">990 </font></div> </td> </tr> <tr> <td align="justify" style="vertical-align:top"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Total Amount </font></td> <td style="vertical-align:top"> <div align="justify" style="float:right"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">6490 </font></div> </td> </tr> </tbody></table></div> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Note: GST is levied even on the service charge - yes, a tax on a tip. The double whammy of gratitude.</font></p> <h2 style="text-align:justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The Central Consumer Protection Authority (CCPA) set up in 2020 under the Consumer Protection Act, regulates unfair trade practices and misleading ads. </font></h2> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The CCPA on 4th July 2022 (<strong><a href="https://doca.gov.in/ccpa/files/guidelines-to-prevent.pdf" target="_blank">F.No. J-25/57/2022-CCPA</a></strong>) issued guidelines to prevent unfair trade practices and protection of consumer interest with regard to levy of service charge in hotels and restaurants. </font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><em>It essentially told restaurants: “Tips are not taxes, and coercion is not courtesy.” </em></font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The guidelines were clear: </font></p> <div><blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">- No automatic or default service charge in bills. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">- No service charge disguised under other names. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">- No forcing customers to pay it. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">- No denying entry or service based on refusal to pay. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">- No bundling service charge with food and then levying GST on the total. </font></p></blockquote></div> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Naturally, the restaurant lobby wasn't thrilled. </font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">These guidelines were promptly challenged in the Delhi High Court, which gave its verdict on 28.03.2025 - <a href="https://taxindiaonline.com/searchcaselaw/details?id=186216&type=caselaw&keyword=null" target="_blank"><strong>2025-TIOL-495-HC-DEL-ST</strong></a></font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The High Court perceived many problems in the collection of service charge: </font></p> <blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">1. The nomenclature itself i.e., service charge, especially after the introduction of service tax, is confusing, deceiving and misleading; </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">2. In the various bills of restaurants, the charges are not comprehensible as different abbreviated versions such as 'VSC', 'SER', 'SER CHGS', 'S. CHARGE', 'SRVCGH', etc. are being used which results in confusion to the customers that the same may be a charge levied by the Government; </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">3. The nomenclature is also not being made visible in the bills generated by the establishments; </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">4. Service charge is added right below the total amount of the cost of the food, followed by GST and taxes. For any consumer who does not examine the bill thoroughly, the impression given is that the service charge is a component of tax; </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">5. The service charge which ought to be in the form of a tip or a gratuity to the staff after enjoying satisfactory services, has now been adapted and converted into some sort of levy. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">6. Private establishments do not have the power to impose such levies or even collect such levies. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">7. A compulsory mandatory levy is a sovereign function. </font></p></blockquote> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The High Court observed that there is no uniformity in the percentage of service charge collected. The manner of enforcement of payment of service charge is also coercive in nature. In some cases, service charge is being confused with service tax or a mandatory tax imposed by the government. In fact, for the consumers, the collection of service charge is proving to be a double whammy i.e., they are forced to pay service tax and GST on the service charge as well. </font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The High Court was not convinced with the submission of the Petitioners that service charge is used in some way for benefit of staff as it is a feeble argument to say the least. There is no evidence provided to show that the amount collected by way of service charge is in some way benefitting the staff. Even if it were so, it is only such amount which is voluntarily paid by customers that can be utilised for the welfare of the staff. Mandatory collections which are detrimental to customers cannot be justified on the basis of some hidden benefit to staff of the establishments. </font></p> <p align="justify"><img src="https://admin.taxindiaonline.com/UploadedFiles/Customs/CaseLaws/2026/cartoon.jpeg" style="height:451px; width:455px"/></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">It was noted that there are a large number of establishments which do not collect service charge. </font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The High Court found the illegality in the collection of service charge threefold: </font></p> <blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">(i) That it is mandatory and compulsory to pay an extra amount for service given by the restaurant and the same cannot be waived off even at the request of the consumer, who may be dissatisfied by the service. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">(ii) The nomenclature associated with respect to collecting the charge i.e. 'levy' and 'service charge' is misleading the consumers; the terminology used by the restaurant establishments to collect the same misleads the consumers into believing that it is some kind of a tax or levy by the State. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">(iii) Further, the same is not transparently being made visible to the consumers thereby affecting the consumer's right to know. </font></p></blockquote> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The Court concluded: </font></p> <blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">1. 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 the 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; </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">2. The collection of service charge and use of different terminologies for the said charge is misleading and deceptive in nature. The same constitutes an unfair trade practice; </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">3. The fact that service charge can be collected as it is part of a voluntary contract/agreement made by the consumer who enters the establishment and avails of the services after seeing the chargeability of service charge on the menu card is an argument which is not tenable as such a condition is onerous and constitutes an unfair contractual condition; </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">4. Consumer rights cannot be subjugated to an argument that a contract is being entered into by the consumer while entering the establishment to pay service charge as the payment and collection of service charge is itself contrary to law; </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">5. If consumers wish to pay any voluntary Tip for services which they had enjoyed, the same would obviously not be barred. The amount, however, ought not to be added by default in the bill/invoice and should be left to the customer's discretion. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">6. The CCPA may consider permitting change in the nomenclature for Service Charge which is nothing but a 'Tip or a gratuity or a voluntary contribution'. Terminology such as 'voluntary contribution', 'staff contribution', 'staff welfare fund' or similar terminology can be permitted. The use of the word 'service charge' is misleading as consumers tend to confuse the same with service tax or GST or some other tax which is imposed and collected by the government. </font></p></blockquote> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The writ petitions were dismissed with costs of Rs. 1 lakh each to be deposited with Central Consumer Protection Authority to be utilized for consumer welfare. </font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Armed with the High Court judgement, the CCPA sprang into action and took <em>suo motu </em> cognizance against 27 restaurants located across the country, for violation of consumer rights and adoption of unfair trade practices under Section 2(47) of the Consumer Protection Act, 2019, relating to the mandatory levy of service charge. </font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Recently, the CCPA issued orders against two restaurants and observed; </font></p> <blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2" style="background-color:#c1dfe8">1. The consumer rights includes- "the right to be informed about the quality, quantity, potency, purity, standard and price of goods, products or services, as the case may be, so as to protect the consumer against unfair trade practices" and “the right to seek redressal against unfair trade practices or restrictive trade practices or unscrupulous exploitation of consumers.” </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2" style="background-color:#c1dfe8">2. It can clearly be concluded that when a restaurant displays a menu with specific prices, the consumer is duly informed about the cost of the food. However, if a mandatory service charge is added later, it conveys an express or implied representation that the restaurant, a service provider had deliberately concealed the actual price of the food and service thereof, constituting an unfair trade practice. </font></p></blockquote> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">In the case of one restaurant, the CCPA ordered to: </font></p> <blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">1. Take immediate steps to modify the software generated billing system by removing default addition of service charge or charge by any other name. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">2. Pay a penalty of Rs. 50,000/- for violation of Consumer Rights and Unfair Trade Practice. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">3. Ensure prompt and effective redressal of consumer grievances, the restaurant's email ID available on its public platform should be active and functional at all times as mandated under The Consumer Protection Act, 2019. </font></p></blockquote> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">In the case of the other restaurant, the CCPA ordered: </font></p> <blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">1. Refund full amount of service charge of Rs. 801 to the consumer. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">2. Discontinuation of practice of levying service charge forthwith. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">3. To pay a penalty of Rs. 30,000/-for violation of Consumer Rights and Unfair Trade Practice. </font></p></blockquote> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Many complaints were received from consumers regarding forcible collection of service charge: </font></p> <blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">1. Confused with service charge and GST levied by the Government; there were instances where the owners of restaurants had stated that service charge is a government rule. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">2. Service charge was forced to be paid by the customers using brute force, threats, etc. In some cases, </font><font face="Verdana, Arial, Helvetica, sans-serif" size="2" style="background-color:#c1dfe8">upon the customers refusing to pay the service charge, bouncers were called, and threats were issued </font><font face="Verdana, Arial, Helvetica, sans-serif" size="2">to pay the entire bill (Mandatory generosity enforced with muscle!) </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">3. Complaints of some restaurants putting wrong GST numbers in the bill to avoid being traced were also made. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">4. Service charge does not depend upon the quality of service provided and it is a mandatory payment. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">5. Some consumers complained that service charge of 13% is being collected over and above the GST. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">6. There were also examples of bills not giving the full expansion of the word 'Service Charge' and using the abbreviation such as 'VSC' for voluntary service charge, 'SC' for service charge, 'SER', 'CHGS', 'S. CHARGE', 'SRVCGH', etc. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">7. The bills were also generated on dot matrix printers and the printout of the bill was barely readable. </font></p></blockquote> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Many of us have faced this. Most of us have swallowed it - along with the overpriced soup. </font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">So next time you dine out, remember: service charge is optional. But if you do pay it, brace yourself - GST will follow. Because in the republic of chutneys and curries, even gratitude isn't safe from taxation. </font></p> <p align="justify"><font color="#ff0000" face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong>Until next week</strong> <strong>may your bill be legible and your tip discretionary. </strong></font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Comments/feedback welcome at <a href="mailto:vijaywrite@tiol.in">vijaywrite@tiol.in </a> or 9848111243 (WhatsApp) </font></p> </body> </html>