Consumers should be informed about service charge in the menu card, he added.
"Service charge does not exist. It is being wrongly charged. We have prepared an advisory on this issue. We have sent it to the PMO for approval," Mr Paswan said.
Once approved by the Prime Minister's Office (PMO), the advisory will be issued to all states and union territories. Levying service charge without customer consent will be considered as an unfair trade practice, under the Consumer Protection Act.
Explaining the proposed advisory, a senior ministry official said, "No customer should be forced to pay service charge. If customers want they can pay a tip to waiters or give their consent to levy the charge in the bill."
The advisory will also be useful for Voluntary Consumer Organisations (VCOs) fighting for consumer right, he added.
In January, the Consumer Affair Department had said that customers can choose not to pay service charge, if they were unsatisfied with the experience.
The minister also wants to 'fix' portions served to consumers in order to stop wastage of food.
"I noticed when I went to restaurants that food was being wasted. We cannot see this happening in a country where there are so many poor. I asked the industry and restaurants to come for meeting and discuss if there is any legal provision to fix portions," Mr Paswan earlier told NDTV.
The Food and Public Distribution ministry is reportedly creating a questionnaire for hotels and restaurants, asking their opinion on how much should be served in a dish and how much a customer can consume.
However, Mr Paswan today said that the government will not make any law or issue any order to hotels or restaurants to regulate the amount of food on a plate.
(With PTI inputs)