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

NEW DELHI: The income tax department has detected massive evasion by restaurants, which may be of the order of over Rs 25,000 crore.Just based on data from Swiggy and Zomato, the evasion is pegged at Rs 7,500 crore as 8,000 restaurants have got TDS mentioned against them but have not bothered to file returns.

The data is based on an analysis of data for four years from 2021-22 to 2024-25.

Data for the last financial year is not yet available.In 2024-25 alone, these restaurants raked in close to Rs 2,700 crore of revenue for which tax of Rs 25 crore or so has been deducted. Every time you order food on one of the food delivery apps, 0.1% of the bill amount is deducted as tax (TDS), which used to be 1% in the initial years. Since TDS does not apply to dine-in customers, which typically generate three-to-four times the revenue of what an eatery earns from food delivery, the revenue for the restaurants is a multiple of what is shown via TDS through food delivery apps.

Over the four years starting 2021-22, govt has collected close to Rs 75 crore in TDS, with the number of such restaurants rising 65% during this period.Authorities are looking to start a new drive to get restaurants and eateries to pay taxes that are due to govt. In recent years, the income tax department has relied on its "nudge campaign", using data for a targeted campaign, to get those under-reporting or concealing income to pay up and then act against defaulters.

Restaurants have been found to be suppressing income in the past too and were one of the most vocal opponents of GST when it kicked in. Last year, an exercise covering nearly 1.8 lakh restaurants showed that they were under-reporting income by 30-35% on average. Tax authorities surveyed 70-odd and wrote to over 60,000 of them asking to pay up. As reported by TOI on March 9, the tax department estimated under-reporting of Rs 70,000 crore in the case of bills vanishing from cloud-based system.

Besides, apart from cash, payments were routed through accounts of waiters and workers to suppress income of restaurants. The move has led to some improvement in compliance but not significantly.Now, the exercise is even more foolproof with tax authorities even identifying restaurants, most of which have income of Rs 2-5 crore across major cities. The numbers are obviously larger in the metros and bigger cities.