The Government of India has declared the inclusion of service charges on hotel and restaurant bills to be illegal if the customer has not consented. If these charges are included without prior approval, then you can file a complaint against the service provider with the Consumer Affairs Department. It’s extremely unlikely that you will ever need or even want to actually file the complaint, though. In most cases, politely pointing out their ‘mistake’ should be enough. India being India, politeness almost always works better than threats.
I personally would rather leave a tip than pay a pre-added service charge for a variety of reasons. For one thing, a tip is more likely to go into the pockets of the intended recipients.
You may have noticed something like this: with a bill of Rs 1000, a restaurant might add Rs 100 as service charge, and then include service tax on 40% of the main bill plus the service charge (Rs 1100), rather than only the main bill (Rs 1000). So it can be a bit shady.
Please note that a service charge, which is added by the hotel or restaurant, is not the same as service tax, which is levied by the government.
According to an official from Consumer Affairs Ministry, every hotel and restaurant will be soon ordered to display a notice in their premises saying they will seek the customer’s approval before charging service charge.
Besides, Govt. is regularly in talks with hotels and restaurant owners regarding this issue, and they are getting maximum inputs before finding a feasible solution.