- Income Tax Department launched a pan-India check on restaurants for sales under-reporting
- The crackdown targets software-enabled billing systems in Telangana, Andhra Pradesh, Karnataka, Tamil Nadu
- Tax officials suspect Rs 70,000 crore evasion, with Rs 13,000 crore turnover suppression identified
The Income Tax Department on Monday has launched a pan-India verification exercise on restaurants to detect possible under-reporting of sales, sources told NDTV Profit. The crackdown was linked to suspected Rs 70,000 crore tax evasion in the restaurant sector.
People in the know told NDTV Profit that tax officials suspect large-scale under-reporting of sales and data deletion to evade taxes. The action is targeted at software-enabled restaurant billing networks.
The evasion is suspected to be across the states of Telangana, Andhra Pradesh, Karnataka and Tamil Nadu. According to the people in the know the suppression of turnover extrapolated using hard data of Rs 13,000 crore.
According to PTI, tax authorities are surveying (visiting only office premises) several restaurants, including around five in Delhi, to understand their billing system. The verification exercise is expected to end in a few days.
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The probe began after the department's investigation wing in Hyderabad recently surveyed the premises of a local company that creates restaurant billing software, PTI reported quoting sources. It was found that certain hotels and restaurants were allegedly manipulating the software to under-report their income.
The move highlights the increasing focus of tax authorities on technology-enabled tax evasion practices, especially in the hospitality sector, where large volumes of daily transactions can make it difficult to monitor such chains.
The sector had previously come under the scanner for alleged under-reporting of cash sales. This was majorly focused on establishments that managed both digital and offline payments.
If through the verification exercise the IT department is able to confirm the irregularities then the restaurants would face further tax scrutiny and possible enforcement action under the Income Tax Act.
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