A shocking tax evasion scam has come to light, with investigators revealing that several restaurants in Karnataka, Tamil Nadu and five other states suppressed turnover worth at least ₹70,000 crore from the financial year 2019-20. What started as an investigation into biryani restaurant chains in Hyderabad has reportedly revealed more details about the restaurants suppressing their sales.
According to a Times of India report, investigators analyzed 60 terabytes of transaction data of pan-India billing software used by more than one million restaurants. They also used generative artificial intelligence to crunch data comprising 1.77 lakh restaurant IDs.
A detailed physical and digital investigation in a sample of 40 restaurants in Andhra Pradesh and Telangana revealed suppression of approx ₹400 million crowns.
How did restaurants suppress sales?
Using data from the billing software provider’s center in Ahmedabad, officials analyzed the transactions at the ministry’s digital forensics and analytics lab in Ayakar Bhavan, Hyderabad.
The restaurants would record all transactions — cash, card and UPI — to maintain internal controls, but later manipulate the backend data, TOI reported.
Documents accessed by this media outlet revealed two patterns: the selective deletion of cash invoices to reduce reported income, and the mass deletion of entire billing periods – sometimes up to 30 days – before filing returns that showed only a fraction of actual income.
The probe examined the value of the transactions ₹2.43 lakh crore for six financial years from 2019-20 to 2025-26. Using high-capacity systems and artificial intelligence tools, including generative artificial intelligence, officials mapped GST data to individual outlets using publicly available information, the report said.
Karnataka tops the list
Revenue officials have revealed widespread suppression of sales by restaurants across India, with — Tamil Nadu, Karnataka, Telangana, Maharashtra and Gujarat — emerging as the first five states where the leak was detected.
Karnataka topped the list with suspected near-leakage ₹2,000 crore, followed by Telangana ( ₹1,500 crore) and Tamil Nadu ( ₹1200 million crowns). Based on a sample estimate, officials concluded that 27% of total sales were suppressed.
What began as a regional investigation in Hyderabad, Visakhapatnam and nearby cities soon revealed a wider pattern, prompting the Central Board of Direct Taxes to expand the probe nationwide. Officials now believe this may be just the tip of the iceberg, with other billing platforms and businesses likely to come under scrutiny.