Udaipur, March 29, 2025 - The Delhi High Court has ruled that the service charge added by restaurants and hotels is an unfair trade practice and cannot be made mandatory. The court said that service tax or tips should be voluntary and not forced on customers.

The ruling was given by a division bench of Justices Pratibha M Singh and Rajneesh Kumar on Friday, March 28, 2025. The court had earlier said that charging both GST and service charge makes the total bill very high for customers.

The court also suggested that restaurants should rename "service charge" to "staff charges" to avoid confusion. However, hotel associations argued that changing the name might confuse customers.

Hotel bodies defended the service charge, saying that it helps in the fair distribution of tips among staff and is a common global practice. They also claimed that there is nothing illegal about it.

In 2022, the High Court had stayed guidelines that banned automatic service charges on bills. These guidelines were made to protect consumer rights and stop unfair practices. Restaurants generally add a 10% service charge to the bill.