Since April, convicted criminals in England and Wales have had to pay a charge of between £150 and £1,200 towards the cost of their case.
MPs on the justice select committee said the charge, which is not means-tested, created "serious problems" and was often "grossly disproportionate".
Ministers said it was under review.
The fee is paid on top of fines, compensation orders and defendants' own legal charges, and is higher for those convicted after pleading not guilty.
It is set according to the type of case, with the minimum charge for magistrates' courts and the maximum level for crown court cases.
In March, the then Justice Secretary Chris Grayling said the fee would ensure that criminals "pay their way".
But chairman of the cross-party committee Bob Neill said: "The evidence we have received has prompted grave misgivings about the operation of the charge, and whether, as currently framed, it is compatible with the principles of justice."
He added that "in many cases it is grossly disproportionate" and created "perverse incentives - not only for defendants to plead guilty but for sentencers to reduce awards of compensation and prosecution costs".
The committee's report said the lack of discretion for judges and magistrates on the level of the charge was creating "unacceptable consequences within the criminal justice system".
It cited the case of a woman who had admitted stealing a four-pack of Mars Bars worth 75p, saying she "had not eaten in days" after her benefits were sanctioned.
She was ordered to pay a £150 criminal courts charge on top of her £73 fine, £85 costs, a £20 victim surcharge and 75p compensation.
The committee also said it was "highly sceptical" of government claims that the charges could deliver a net revenue of £80m to £160m a year by 2023 - with an annual cost of collection of about £20m and a £5m bill for imprisoning defaulters.
The Ministry of Justice said the concerns were noted and the operation of the fee was being kept under review.
It comes after Justice Secretary Michael Gove told Parliament earlier this month that the charge was generating revenue and helping to "ensure that the taxpayer is not the first port of call for supporting the way in which our courts operate".
But Frances Crook, chief executive of the Howard League for Penal Reform, said the criminal courts charge was "unrealistic and unjust" and called on the Ministry of Justice to "suspend this policy immediately".
"The innocent have been put under pressure to plead guilty, and ordering indigent people to pay money they simply do not have is never going to work," she said.

An inquiry for "attempted terrorist murder" has been launched into Saturday's attack in Charleroi.
The man reportedly shouted "Allahu Akbar" ("God is greatest") during the assault outside a police station. He died after being shot by officers.
On Sunday the so-called Islamic State group called him one of its "soldiers".
The statement was similar to those released after recent attacks in France and Germany.
Following standard practice, prosecutors did not name the attacker but gave his initials as KB.
He had been living in Belgium since 2012 and had minor offences to his name.
Belgium has been on alert since bomb attacks on the city's airport and subway system in March killed 32 people.
Charleroi was used as a base by some of the jihadists involved in that attack, and in the attack on Paris in November 2015.
Prime Minister Charles Michel, who broke off his holiday after the attack, has urged people to remain "constantly vigilant" but "keep a cool head".
Saturday's attack unfolded at just before 16:00 local time (14:00 GMT).
A police spokesman said the attacker pulled the machete out of a sports bag as he approached a guard post outside the police HQ.
According to a local news agency, one of the policewomen was treated for serious facial wounds, while the other suffered only minor injuries.
The assailant was shot and killed by another officer, who was nearby.

Police said it was found in a private residence in Blanchardstown on Friday night.
A number of people were moved from their homes during the alert.
The device was then removed to a secure military location for further examination where it was confirmed it was viable.
The criminal courts charge should be scrapped by ministers, a parliamentary committee has said, as it raised "grave misgivings" about the fee's benefits.
[NEXT_CONCEPT]
Belgian officials say a man who wounded two policewomen with a machete was a 33-year-old Algerian with a criminal record but no known terror links.
[NEXT_CONCEPT]
Army Bomb experts have made safe an improvised explosive device found in Dublin.