What Is Vanishing Bill Trick? How It Sparked I-T Surveys At 70 Restaurants In 45 Cities

The Income Tax (I-T) Department of India has initiated a countrywide survey of 70 restaurants in approximately 45 cities to figure out a supposed tax evasion mechanism that is also known informally as the “vanishing bill trick.” The probe forms part of a wider investigation into alleged sales suppression worth about ₹700 crore, linked to the manipulation of restaurant billing software.

What Is The ‘Vanishing Bill Trick’?

According to The Times of India, the surveys were conducted under Section 133A of the Income Tax Act and in accordance with guidelines issued by the Central Board of Direct Taxes (CBDT), officials said. The vanishing bill trick is a ploy whereby records of cash transactions in the billing program of a restaurant are deleted or edited, which effectively removes the revenue of a given day from the record. 

In the majority of restaurants today, transactions are registered in the billing software, as they are being paid with cash, cards or UPI. However, investigators found that in several establishments, cash bills were allegedly removed from the system at the end of the day or month.

Removing a fraction of these transactions would enable the restaurants to record lower sales in their books, which would decrease the amount of revenue they report to the tax authorities, and hence avoid paying both the income tax and the GST sums.

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₹700 Crore Tax Evasion Under Income Tax Department Scanner

The investigation teams administered the surveys in various states such as Andhra Pradesh, Delhi, Maharashtra, Karnataka and Gujarat, among others. The inspection covered restaurants in cities like New Delhi, Mumbai, Pune, Gurugram, Chennai and Bengaluru and establishments in Rajahmundry, Nellore, Visakhapatnam, Amravati, Hapur and Lucknow.

Authorities were also sent to such places as Jaipur and Ajmer in Rajasthan; Malappuram and Kozhikode in Kerala; Kolkata and Siliguri in West Bengal; Guwahati in Assam; Patna and Saran in Bihar; and Koderma in Jharkhand.

Authorities suspect that the establishments surveyed may collectively be linked to sales suppression worth nearly ₹700 crore. The national crackdown received a boost when investigators gained access to terabytes of digital data belonging to a software company, based in Ahmedabad, suspected of providing billing systems deployed to some restaurants.

The data was examined for hours at the digital forensic and analytics laboratory of the Hyderabad Income Tax unit at Aayakar Bhavan, where officials identified patterns suggesting possible manipulation of billing records. These trends were allegedly leading to systematic deletion or distortion of sales records in various locations.

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All You Need To Know

The existing surveys are based on a prior crackdown in Telangana, at around 40 restaurants, in which the Income Tax Department estimated over 490 crore of alleged tax evasion. Authorities claim that the most recent countrywide measure is meant to establish whether the so-called vanishing bill technique is prevalent among restaurant businesses in an effort to hide revenue.

The government is now scrutinising electronic records, the transaction records and financial reports involved in the surveys to find out how large the alleged manipulation was and what they can do next, as stated by The Times Of India. 

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