Biryani trail exposes Rs700 billion restaurant tax scam in India

What began as a closer look at popular biryani restaurant chains in Hyderabad has snowballed into what could be one of the biggest alleged tax suppression cases in India’s food and beverage sector.

According to a report by The Times of India, an in-depth probe by the Income Tax department’s Hyderabad investigation unit has uncovered suspected sales suppression running into at least Rs 700 billion since the 2019–20 financial year. The investigation, powered by forensic data analytics and AI tools, analysed massive volumes of billing records used by restaurants across the country.

Officials said the breakthrough came after analysing 60 terabytes of transactional data from a pan-India billing software platform used by more than 100,000 restaurants. The software, which controls roughly 10% of the country’s restaurant billing market, provided access to billing records linked to 177,000 restaurant IDs across India, the report said.

Using big data analytics and AI tools, including Generative AI, investigators examined transactions spanning six financial years from 2019–20 to 2025–26, covering total billing of approximately Rs 2.43 trillion. According to officials, eateries suppressed sales turnover of at least Rs 700 billion during this period.

Across India, the software provider recorded post-billing deletions totalling Rs 133 billion out of the Rs 700 billion. In Andhra Pradesh and Telangana alone, the suppression of sales reached Rs 51 billion. Detailed physical and digital inquiries in a sample of 40 restaurants in Andhra Pradesh and Telangana detected suppression of about Rs 4 billion.

Officials are yet to calculate the tax liability along with penalties on the suppressed income.

The top five states where evasion was detected were Tamil Nadu, Karnataka, Telangana, Maharashtra and Gujarat. Karnataka logged the highest instances of deletion at roughly Rs 20 billion, followed by Telangana (Rs 15 billion) and Tamil Nadu (Rs 12 billion).

Officials said some restaurants did not even bother to delete their records even as they under-reported sales in their income tax returns. Based on a sample estimate, officials have concluded that 27% of total sales were suppressed.

Investigators accessed data from the billing software provider’s centre in Ahmedabad and analysed it at the department’s digital forensic and analytics lab in Ayakar Bhavan, Hyderabad.

Investigators said restaurants typically enter all sales — card, UPI and cash — into the software to prevent internal manipulation by servers, cashiers and managers.

However, one pattern flagged during the probe was the selective deletion of cash invoices. In several cases, restaurants allegedly retained only a portion of cash entries and deleted the rest to reduce income tax and GST exposure.

Another pattern involved bulk deletions — wiping bills clean for a chosen date range, including up to 30 days of billing — followed by filing returns that reflected only a fraction of actual sales.

The probe initially began with searches in Hyderabad, Visakhapatnam and other towns in Telangana and Andhra Pradesh, where officials first found evidence that the software was being used to suppress sales. The Central Board of Direct Taxes later expanded the investigation nationwide.

Officials believe the current findings may only be the tip of the iceberg, noting that multiple billing platforms operate in the sector and could face similar backend scrutiny.