Hyderabad Tax Evasion Case: ₹70,000 Crore Scam Exposed

Recent inspections of biryani restaurants in Hyderabad have culminated in one of India’s largest financial crackdowns ever. What began as a local investigation has recently led to the uncovering of a multi-billion-dollar tax fraud scheme (approximately ₹70,000 crore) affecting restaurants all across India. The current news cycle places a heavy emphasis on the results of this investigation.

Authorities identified the fraud as more than just an area problem when they began looking at anomalies in the billing practices of prominent restaurants. The outcomes have created shockwaves across both the restaurant industry and the country’s tax officials.

How a Standard Procedure Developed Into a Nationwide Inquiry

The investigation began with a routine inspection of Hyderabad’s biryani restaurants. During the course of the inspection, officials discovered discrepancies between the reported number of customers to the restaurants and the amount of sales recorded.

As investigators continued their checks, they began pinpointing common billing systems utilized by many restaurants. They identified that one specific software program used for billing (and for managing various aspects of a restaurant’s business) was present in over 100,000 restaurants nationwide.

Utilizing advanced machine-learning and artificial intelligence tools, officials evaluated billing records for nearly 177,000 restaurants in India. The amount of data evaluated amounted to over 60 terabytes.

What officials found was alarming?

Over ₹13,000 Crore in Sales Either Modifications or Complete Eliminations of Bills

Officials found that a vast number of bills had either been modified or completely removed from a restaurant’s billing system shortly after bills have been paid by customers.

In India, it has been reported that restaurants have cancelled bills valued at more than ₹13,000 crores across the country.

Total concealed sales in both Andhra Pradesh and Telangana were ₹5,100 crores. To cross-check the digital data, officials inspected a total of 40 restaurants and compared their real sales figures with their system figures. From just this limited review, they discovered that ₹400 crores of statements made were not declared.

From the data analysed, it has been estimated that approximately one quarter of total sales at all restaurants may have been concealed.

Countries with the Most Documented Evasion

Some states had larger discrepancies than other states. The largest discrepancy in suspected evasion was found in Karnataka followed by Telangana and Tamil Nadu.
Investigators were also shocked to find that in some cases restaurants did not even attempt to change the electronic bills. They just listed lower than actual total income on their returns for tax purposes.

The extent and simplicity of the fraud has made this subject one of the most talked-about topics in latest news on business and tax reforms.

How the Fraud Worked

The majority of restaurants log all transactions for accounts — be it cash, credit card, or UPI — via their billing system in order to avoid theft by employees. However, because of their analysis, researchers found that in numerous cases, the owners themselves had manipulated the system.

Some of the most common ways of doing this are as follows:

• Only eliminating cash transactions from sales records because cash is difficult to trace.
• Removing all invoices from certain days.
• Destroying the complete month of sales data.
• Filing taxes with falsified income.

The overall sales data will be evaluated over a 6-year timeframe totaling approximately ₹2.43 lakh crore in sales volume. AI technologies were used to compare invoice data against GST data and public records to find commonality or differences.

The Investigation expanded beyond Telangana

Initially, the investigation was limited to Hyderabad and Visakhapatnam. However, once the Officials realised the importance of the Issue. They expanded the Investigation beyond the State of Telangana to all of India.

It is believed this is just the tip of the iceberg. Many different types of software exist in the marketplace, therefore, any similar types of patterns could also be hiding elsewhere.

Once all of the enforcement agencies conclude their investigations they expect that this case will impact tax compliance, digital invoicing systems and financial transparency within the Restaurant Industry for many years to come.