The Central Consumer Protection Authority (CCPA) fined Shangri-La Eros New Delhi's restaurant, Mister Chai, ₹1 lakh for levying a service charge on customers without their explicit consent. This practice violated consumer rights and was deemed an unfair trade practice under the Consumer Protection Act, 2019.
- Shangri-La Eros added a 10% service charge automatically to bills.
- Customers were not clearly informed or asked for consent before the charge was applied.
- The CCPA ruled this practice misleads customers and is unfair.
- The hotel changed the charge name to "optional" but still added it by default.
- The Delhi High Court supports the CCPA guidelines against automatic service charges.
Why was Shangri-La Hotel fined for service charges?
The CCPA found that Shangri-La Eros New Delhi's restaurant added a 10% service charge automatically to customers' bills without obtaining their explicit consent. This violated consumer rights because customers might believe the charge is compulsory. The authority ruled this as an unfair trade practice under the Consumer Protection Act, 2019.
What are the rules about service charges in hotels and restaurants?
Guidelines prohibit hotels and restaurants from automatically adding service charges to bills or collecting them under any other name without customers' explicit consent. Consumers must be free to decide whether to pay these charges. The Delhi High Court upheld these rules in a March 2025 judgment, supporting the CCPA's stance.
What examples showed the unfair practice at Shangri-La?
The CCPA reviewed complaints from May and June 2025. One bill showed a ₹435 service charge on a ₹4,350 subtotal, with GST added, totaling ₹5,646. Another bill had a ₹125 service charge on ₹1,250, plus CGST and SGST of ₹123.75, totaling ₹1,623. These charges were added automatically without clear consent.
How did Shangri-La respond to the allegations?
The hotel claimed the service charge was discretionary and customers could request a waiver. They also said the charge was mentioned on the menu and refunds were available. Later, they renamed the charge "Charges for voluntary staff contribution (optional)" but still added it automatically, requiring customers to ask for removal.
Why did the CCPA reject Shangri-La's explanation?
The CCPA stated that automatically adding the charge and forcing customers to opt out creates an "opt-out" system rather than obtaining consent upfront. Simply labeling the charge as optional on the menu does not solve the problem if it is included by default in the bill.
What penalties and orders did the CCPA issue?
The CCPA imposed a penalty of ₹1,00,000 on Shangri-La Eros New Delhi. The hotel was also directed to submit a compliance report within 15 days of receiving the order, confirming they will stop the unfair practice and follow consumer protection guidelines.
Frequently Asked Questions
Q: Can hotels add service charges automatically to bills?
A: No, hotels and restaurants cannot add service charges automatically without explicit customer consent. Customers must be informed and have the choice to pay or not.
Q: What happens if a hotel violates service charge rules?
A: The Central Consumer Protection Authority can impose penalties and order the hotel to comply with consumer protection laws, as in the case of Shangri-La Eros New Delhi.
Q: How can customers avoid paying unwanted service charges?
A: Customers should check their bills carefully and ask for the removal of any service charge that was added without their consent.
