Hyderabad: India’s Income Tax Department has uncovered an alleged ₹70,000 crore tax evasion racket in the food and beverage sector using artificial intelligence and big data analytics. What began as a probe into a few biryani restaurant chains in Hyderabad has expanded into a nationwide investigation after authorities analysed 60 terabytes of transaction data and mapped 1.77 lakh restaurant IDs.
According to officials, the data was sourced from a billing software provider used by more than one lakh restaurants across the country, accounting for roughly 10% of the market. The analysis revealed that since the 2019–20 financial year, restaurants had collectively suppressed at least ₹70,000 crore in sales turnover. The exact tax liability, along with interest and penalties, is yet to be computed.
60 Terabytes of Data and 1.77 Lakh Restaurant IDs
Investigators used high-capacity digital forensic systems and generative AI tools to process the massive dataset. GST numbers were matched with restaurant entities using open-source intelligence and publicly available information. Initial findings from Hyderabad, Visakhapatnam and other parts of Telangana and Andhra Pradesh showed clear signs of manipulation in billing records, prompting the Central Board of Direct Taxes (CBDT) to expand the probe nationwide.
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The Modus Operandi: Deleting Cash Invoices
The investigation found that many establishments first recorded all transactions—card, UPI and cash—in their billing systems to maintain internal controls. Subsequently, selected cash invoices were deleted before filing income tax and GST returns, allowing them to report lower sales. In several cases, bulk deletions wiped out billing data for entire date ranges, effectively removing large portions of revenue from the tax net.
Out of ₹2.43 lakh crore in billing data captured in the software, authorities detected post-billing deletions worth about ₹13,317 crore. A sample physical and digital verification of 40 restaurants in Andhra Pradesh and Telangana alone revealed suppressed sales of nearly ₹400 crore. Officials estimate that roughly 27% of total sales were under-reported.
State-wise analysis showed the highest deletions in Karnataka at around ₹2,000 crore, followed by Telangana at ₹1,500 crore and Tamil Nadu at ₹1,200 crore. The top five states where evasion patterns were detected are Tamil Nadu, Karnataka, Telangana, Maharashtra and Gujarat. In some cases, businesses did not delete invoices but simply declared lower turnover in their tax filings.
Officials described the findings as “only the tip of the iceberg”, noting that multiple billing platforms operate in the sector and their backend data may also come under scrutiny. Wider surveys and search operations in the food and beverage industry are likely in the coming months.
Technology Reshapes Tax Enforcement
Experts say billing software misuse has long been a vulnerability in cash-intensive businesses, but the integration of GST data and digital transaction trails is tightening compliance. The current probe signals a shift towards technology-driven tax administration, where algorithmic analysis can flag discrepancies across millions of transactions.
The Income Tax Department is expected to seek explanations from the software provider, restaurant chains and individual establishments linked to the discrepancies. Recovery proceedings could involve substantial tax demands along with penalties and interest.
Beyond its immediate financial implications, the investigation underscores how technology is reshaping both economic activity and regulatory oversight. What started with a handful of biryani outlets has evolved into a sector-wide warning: digital manipulation of records is increasingly detectable, and large-scale tax evasion is far harder to conceal in the era of AI-enabled analytics.
