A routine tax inspection of biryani restaurants in Hyderabad has uncovered what officials describe as a staggering ₹70,000 crore tax evasion racket spread across India’s restaurant industry. The probe, led by the Income Tax Department’s Hyderabad unit and later expanded nationwide under the supervision of the Central Board of Direct Taxes (CBDT), analysed nearly 60 terabytes of billing data from a popular restaurant software used by around 1.77 lakh outlets.
Investigators allege that many establishments manipulated digital billing systems to delete or alter records particularly cash transactions to suppress income and evade taxes over a six-year period beginning 2019-20. The crackdown, which has now extended to multiple states including Karnataka, Telangana and Tamil Nadu, is expected to result in tax recovery proceedings and possible penalties, while further scrutiny of additional billing platforms is underway.
AI-Powered Forensics Reveal Systematic Suppression of Sales
What began as a compliance check of biryani outlets in Hyderabad and neighbouring Visakhapatnam soon revealed patterns that officials describe as “too consistent to ignore”. According to reports by The Times of India and The Economic Times, officers detected discrepancies between actual customer footfall and reported turnover. This led to a deeper digital investigation into a widely used restaurant billing software that reportedly covers nearly 10 per cent of India’s organised restaurant market.
Authorities secured backend access to the software’s data servers and began analysing billing entries from roughly 1.77 lakh restaurant identification numbers. Over six financial years, the software had recorded transactions worth approximately ₹2.43 lakh crore. Using artificial intelligence tools, data-matching algorithms and digital forensic techniques, officials combed through around 60 terabytes of information to identify suspicious patterns.
Investigators claim that bills worth more than ₹13,000 crore were deleted after payment confirmation. A common method allegedly involved selectively removing cash invoices, as cash transactions are harder to trace through banking channels.
In some instances, entire days or even months of billing data were reportedly wiped from the system before tax returns were filed, allowing restaurants to declare significantly lower revenues. Officials estimate that nearly one-fourth of total sales recorded in the system may have been suppressed.
To verify the digital findings, tax officers conducted field visits to 40 restaurants across Andhra Pradesh and Telangana. Even within this small sample, authorities reportedly detected nearly ₹400 crore in under-reported turnover. Preliminary state-wise analysis indicates that Karnataka recorded the highest quantum of suspected evasion, followed by Telangana and Tamil Nadu. Some establishments allegedly did not bother deleting bills but simply under-declared total earnings while filing tax returns.
Officials involved in the investigation stated that the billing software originally intended to ensure internal accountability and prevent staff pilferage was misused by owners themselves to alter sales data. “The manipulation appears deliberate and structured,” a senior officer was quoted as saying in media reports, adding that advanced analytics were crucial in uncovering the scale of discrepancies.
From Local Checks to a Nationwide Crackdown
The probe’s origins were modest. Routine inspections in Hyderabad were meant to ensure compliance with income tax and GST norms among popular eateries. However, unusual patterns in billing prompted authorities to widen the scope. The data analysis was reportedly carried out at the Income Tax Department’s digital forensic and analytics laboratory in Hyderabad, where AI tools cross-verified billing records with GST registrations, bank data and publicly available information.
As the scale of suspected suppression became evident, the investigation was escalated to the national level under the guidance of the CBDT. Officials are now examining additional billing platforms to determine whether similar practices were adopted elsewhere. Sources suggest that enforcement measures could include tax reassessments, penalties and possible prosecution in cases where deliberate evasion is established.
The findings have sent ripples through the hospitality sector. Industry observers note that while the organised restaurant market has rapidly digitised over the past decade with point-of-sale systems and cloud-based billing becoming the norm the case highlights vulnerabilities in oversight. Tax experts argue that digital records, once assumed to ensure transparency, can also be manipulated if backend controls are weak.
At the same time, stakeholders caution against painting the entire sector with the same brush. India’s restaurant industry comprises lakhs of small and medium enterprises, many of which operate on thin margins and depend heavily on seasonal demand. Representatives from hospitality associations have urged authorities to distinguish between wilful evasion and genuine clerical or compliance errors, especially given the complexity of GST regulations.
Officials maintain that the investigation remains evidence-based and targeted. They emphasise that technology has played a pivotal role in identifying patterns that would have been impossible to detect through manual scrutiny alone. The alleged ₹70,000 crore figure, if substantiated, could mark one of the largest tax evasion cases uncovered in the country’s service sector.
The Logical Indian’s Perspective
This case is a powerful reminder that integrity and accountability must go hand in hand with digital progress. Technology, when used ethically, can strengthen transparency and build trust between businesses and the state. But when misused, it erodes public confidence and deprives society of crucial resources that fund healthcare, education and welfare.
While the alleged scale of evasion is deeply concerning, enforcement must remain balanced, fair and rooted in due process. Honest entrepreneurs particularly small business owners striving to recover from pandemic-era setbacks should not be subjected to undue harassment. Clear communication, simplified compliance systems and transparent investigation procedures are essential to ensure that accountability does not turn into intimidation.
