I-T department estimates 25k cr tax evasion by restaurants

The income tax department found a mismatch between restaurant activity on Swiggy and Zomato and their tax filings. About 8,000 restaurants had tax deducted at source, or TDS, recorded against them, yet they had not filed returns. This matters because the digital payment trail gives authorities a direct way to identify possible non-compliance.

The review covered four years, from 2021-22 through 2024-25. In 2024-25 alone, the restaurants earned nearly Rs 2,700 crore through the apps. Around Rs 25 crore in TDS was deducted from that amount. Across the four-year period, the government collected almost Rs 75 crore in TDS from these restaurants.

The department believes delivery-app figures show only part of the restaurants' business. Since dine-in revenue is typically three to four times delivery revenue, the suspected tax gap may be much larger. Authorities are preparing a targeted campaign to ask identified restaurants to explain or pay their dues, followed by action against defaulters.

Tax deducted at source, or TDS, is an advance collection of tax linked to a payment. Instead of the restaurant receiving the full amount first and paying everything later, the platform withholds a small share and sends it to the government. The restaurant can then account for that deduction when filing its tax return.

The article states that 0.1% of a food-delivery bill is deducted as TDS. The rate was 1% in the initial years. For example, a Rs 1,000 delivery bill would produce Rs 1 in TDS at the current rate. The deduction also creates a digital record connecting the platform, payment, and restaurant.

This record helps tax authorities compare reported income with app activity. TDS does not apply to dine-in customers, however. Therefore, the deduction is not the restaurant's complete tax bill or a full measure of its revenue. It is a small collection made during transactions and a useful compliance signal.

The suspected evasion has two scales. Analysis of Swiggy and Zomato data identified about 8,000 restaurants with TDS recorded but no filed returns. The tax department estimates that this group represents roughly Rs 7,500 crore in evaded tax. That figure comes only from the delivery-app trail.

The broader estimate exceeds Rs 25,000 crore. It includes the likely gap between delivery-app activity and restaurants' total business. The article notes that dine-in customers typically generate three to four times the revenue earned through food delivery. Thus, app data can expose a problem without capturing every sale.

The figures are estimates, not described final collections. The department's four-year review found nearly Rs 2,700 crore of app revenue in 2024-25 alone, with about Rs 25 crore deducted as TDS. Across four years, nearly Rs 75 crore in TDS was collected. Authorities now intend to use the data for recovery and enforcement.

Delivery-app TDS records show money earned through Swiggy and Zomato, but they do not record every customer or sale. The article specifically says TDS does not apply to dine-in customers. That matters because restaurants may earn much more from people eating at the premises than from app orders.

The article estimates that dine-in customers typically generate three to four times the revenue of food delivery. A restaurant showing Rs 1 crore through delivery could therefore have substantially higher total revenue once dine-in business is included. The exact total differs by restaurant, but the mechanism is clear: the app trail is incomplete.

This gap helps explain why Rs 7,500 crore from delivery-app analysis can sit below the department's broader estimate of over Rs 25,000 crore. Authorities are also examining restaurants with income of Rs 2-5 crore across major cities. Their data-based checks aim to compare available records with reported income.

The article describes several alleged ways restaurants hid income. Some bills vanished from a cloud-based system, so sales were not fully visible in digital records. Other payments were made in cash. Money was also routed through accounts belonging to waiters and workers, rather than appearing clearly in the restaurant's own accounts.

These methods can reduce the income shown to tax authorities. If a bill is missing, the recorded sales total falls. If payment moves through cash or another person's account, the normal business trail becomes harder to follow. The article says tax authorities estimated under-reporting of Rs 70,000 crore in the case of bills disappearing from the cloud-based system.

A previous exercise covering nearly 1.8 lakh restaurants found average under-reporting of 30-35%. Authorities surveyed about 70 restaurants and wrote to over 60,000, asking them to pay. Compliance improved somewhat, but not significantly. The department is now using broader data matching to identify restaurants more precisely.

The income tax department's nudge campaign uses available data to contact taxpayers whose reported income appears inconsistent with other records. For the restaurants identified through Swiggy and Zomato data, this likely means receiving a request to review their filings and pay tax that is due. The immediate aim is improved compliance, not simply detection.

The department has used this approach in recent years against people suspected of under-reporting or concealing income. The article says authorities use targeted communication, then act against defaulters. Restaurant data now includes TDS records, app revenue, and identified businesses, many with income of Rs 2-5 crore in major cities.

Restaurants may therefore need to reconcile delivery receipts, TDS, reported income, and other sales. Those that correct errors or pay outstanding amounts may resolve the issue through the campaign. Those that do not respond or remain in default could face further tax action. The article does not specify the exact penalties or procedures.

Income tax is based on income a business earns, not simply on every rupee collected. A restaurant reports its revenue and eligible business expenses, such as costs incurred to operate. Taxable income is generally the amount left after allowable expenses are deducted from revenue. The business then applies the relevant tax rules and rates to that amount.

For example, if a restaurant records Rs 2 crore in revenue and has Rs 1.5 crore in allowable expenses, its taxable income would generally begin at Rs 50 lakh, before other adjustments under tax rules. TDS already deducted through delivery platforms is credited against the tax payable. The restaurant still has to report its complete income, including sales not subject to TDS.

The article focuses on restaurants that had TDS recorded but did not file returns. Without a return, authorities cannot properly compare reported income, expenses, and taxes paid. The article does not specify applicable rates, deductions, or penalties. Those depend on the business's tax status and current rules.