The Biryani Tax Scam: How AI Exposed a ₹70,000 Crore Shadow Economy in India’s Restaurant Sector

India’s love for biryani is legendary. From roadside eateries to large restaurant chains, biryani is one of the most consumed dishes in the country. Ironically, this very popularity helped uncover one of the largest tax evasion scandals in India’s service sector, now popularly known as the “Biryani Tax Scam.” Estimated at nearly ₹70,000 crore, the scam has revealed how technology meant to simplify business operations was allegedly misused to systematically evade taxes across thousands of restaurants.

The Beginning: A Routine Check That Opened Pandora’s Box

The scam came to light during routine verification drives by the Income Tax Department in Hyderabad. Officials noticed a glaring mismatch between customer footfall and the officially reported turnover of certain popular biryani outlets. Restaurants that were visibly crowded throughout the day showed surprisingly low sales figures in their tax filings.

What initially appeared to be isolated discrepancies soon pointed to a pattern of large-scale underreporting. Further scrutiny revealed that the issue was not limited to one city or one restaurant chain but spread across multiple states and thousands of eateries.

The Role of Billing Software: Technology as the Enabler

At the heart of the scam lies a widely used restaurant billing or Point-of-Sale (POS) software, reportedly developed by an Ahmedabad-based company. This software was used by more than 1.5–1.7 lakh restaurants across India, giving it a massive footprint in the food and beverage industry.

The critical issue was not digital billing itself, but specific software features that allowed post-billing manipulation. Investigators found that the system allegedly enabled:

• Editing of invoice amounts after generation
• Deletion of individual bills
• Bulk deletion of entire days or months of sales
• Separate handling of cash and digital transactions

While such features may have been intended for error correction, they allegedly became tools for systematic tax evasion, especially for cash transactions that are harder to trace.

How the Scam Worked in Practice

The alleged modus operandi was simple but effective. Restaurants would record all transactions during the day, including cash, UPI, and card payments. Later, before filing GST and income tax returns, a portion of cash sales would be deleted or altered using the software’s backend features.

For example, a bill of ₹2,800 could be reduced to ₹28, or entire blocks of invoices could be removed altogether. Since GST liability depends directly on reported turnover, this practice significantly reduced tax outgo while maintaining real-world cash flows.

Over time, this created a parallel, unreported economy operating alongside the official books.

AI and Big Data: Turning the Tables

What makes this case historic is how it was uncovered. The Income Tax Department reportedly analysed nearly 60 terabytes of data obtained from the billing software’s servers. This included logs, backups, timestamps, and metadata that restaurants assumed were permanently deleted.

Using artificial intelligence, data analytics, and forensic tools, investigators reconstructed sales patterns, detected anomalies, and compared deleted entries with payment trails, supplier purchases, electricity usage, and even customer density data.

AI algorithms flagged inconsistencies such as:

• Unusually low sales during peak dining hours
• High raw material purchases compared to reported turnover
• Repeated deletion patterns before tax filing deadlines

This technological approach allowed authorities to estimate that nearly 25–30% of total sales were suppressed, leading to the staggering ₹70,000 crore figure.

Why Biryani Became the Symbol

The scam is not limited to biryani alone. South Indian tiffin centres, North Indian dhabas, cafés, and even sweet shops are reportedly under scrutiny. However, biryani became the symbol for three reasons:

1. High volume, high cash component
2. Uniform pricing, making manipulation easier
3. Mass popularity, ensuring consistent daily sales

In cities like Hyderabad, Bengaluru, Chennai, Mumbai, and Ahmedabad, biryani outlets often operate from morning till midnight, generating significant unreported cash flows when misused.

Legal and Economic Implications

The investigation is ongoing, and authorities are expected to issue:

• Tax demand notices
• Heavy penalties and interest
• Possible prosecution under tax and criminal laws

Importantly, the focus is not only on restaurants but also on software accountability. Regulators may examine whether software providers knowingly enabled features that facilitated evasion or failed to implement safeguards.

From a broader perspective, the scam exposes vulnerabilities in India’s GST ecosystem, particularly in sectors with high cash usage. It also highlights how digitisation without oversight can create false confidence in compliance.

What This Means for the Future

The biryani tax scam is likely to trigger major reforms:

• Mandatory audit trails in billing software
• Restrictions on invoice deletion features
• Real-time integration with GST systems
• Increased AI-driven monitoring across sectors

For honest businesses, this could level the playing field by curbing unfair advantages enjoyed by tax evaders. For policymakers, it is a reminder that technology must be paired with accountability.

Conclusion

The Biryani Tax Scam is not just about restaurants or biryani. It is about how scale, software, and silence combined to create one of India’s largest invisible frauds. The use of AI to uncover it marks a turning point in tax enforcement, signaling that digital footprints are far harder to erase than many assume.

As investigations widen, the case will likely reshape how businesses, software providers, and regulators approach digital compliance in India.