I-T department uncovers over ₹25,000cr tax evasion by restaurants
What's the story
The Income Tax (I-T) Department has uncovered massive tax evasion by thousands of restaurants in India. The suspected tax evasion amounts to over ₹25,000 crore. An analysis of data from food delivery platforms Swiggy and Zomato revealed that about 8,000 restaurants with TDS deducted against their earnings had not filed income tax returns. The estimated evasion linked to these establishments is around ₹7,500 crore over four financial years (2021-22 to 2024-25).
Compliance gap
Compliance gap in restaurant industry
The analysis highlights a major compliance gap in the restaurant industry.
It shows that food delivery earnings only account for a fraction of their overall revenue.
TDS is deducted on transactions through delivery platforms, but not on dine-in sales.
These sales usually generate three to four times more revenue than food delivery, further widening the discrepancy between reported income and actual earnings.
Tax collection
Revenue through food delivery platforms
In the fiscal year 2024-25, restaurants made nearly ₹2,700 crore through food delivery platforms. However, only about ₹25 crore was deducted as tax.
Over four years, the government collected nearly ₹75 crore in TDS from these restaurants. The number of identified establishments has also increased by 65% during this period.
Now, the tax department plans to use this data to identify possible under-reporting cases and ask them to file returns/pay dues.
Compliance campaigns
Nudge campaigns to encourage compliance
The I-T department has previously used "nudge campaigns" to encourage taxpayers to correct under-reporting before taking action against defaulters.
An earlier exercise covering nearly 1.8 lakh restaurants found average income under-reporting of 30-35%.
The tax authorities had surveyed around 70 establishments and written to over 60,000 seeking compliance.
The renewed scrutiny comes as they expand data analytics use to identify potential evasion and improve reporting across the restaurant sector.