Hyderabad: Telangana’s GST department has flagged tax irregularities in more than 100 restaurants and eateries across the state, most of them in Hyderabad, after AI-based data analytics uncovered suspected misuse of input tax credits and unlawful GST collection by establishments with cancelled registrations.




A popular restaurant in the Madhapur-Hi-Tec City belt is also among the establishments under scrutiny, officials said.




The department’s analysis has identified two major categories of violations. The first involves restaurants operating under the concessional 5% GST regime, which are barred from claiming input tax credit (ITC) on purchases made for their business and are required to discharge their tax liability entirely in cash.




However, officials found several eateries claiming credit on taxes paid for raw materials and other inputs and using those credits to reduce their GST dues. Sources said around 80 such restaurants and eateries have been identified across Hyderabad and other districts.




The second category relates to businesses that allegedly continued collecting GST from customers even after their GST registrations had been cancelled. Around 100 establishments are under scrutiny in this category, with nearly 10 already found to have collected tax despite not holding valid GST registrations.




Under GST rules, businesses whose registrations have been cancelled cannot collect tax from customers or issue tax invoices.




Officials said registrations are typically cancelled when taxpayers fail to file returns for a prolonged period. The department’s technology platform uses AI-driven analytics to cross-check GST returns, registration status, supplier invoices, purchase records, sales data and digital payment transactions to detect discrepancies and potential tax evasion .




“With analytics, it is becoming increasingly difficult for such frauds to go undetected,” a senior tax official said.




Buoyed by the results, the department is studying AI-based compliance and enforcement models implemented in Tamil Nadu, Chhattisgarh and Maharashtra to strengthen GST monitoring and curb evasion.




Officials said the tax impact of the suspected violations is being assessed and any outstanding dues, along with applicable penalties, will be recovered after completion of the assessment process.