Restaurants Hit by LPG Fears, Tax Probe, Service Charges

India’s restaurant industry is facing multiple pressures at once. This is adding fresh strain on a sector already dealing with rising costs and thin margins. Restaurants across the country are currently grappling with three key issues. These include fears of a commercial LPG shortage, increased scrutiny from the Income Tax Department over alleged sales suppression, and stricter enforcement against mandatory service charges on bills.

The most immediate concern is the supply of commercial LPG cylinders, the primary cooking fuel for restaurants. Reports from several cities suggest irregular supplies, with some eateries considering limiting menus or operating hours. The issue is partly linked to global geopolitical tensions affecting LPG imports and supply chains. Meanwhile, the government has prioritised LPG supply for households and asked refineries to increase production. However, commercial users such as restaurants fear reduced access to cylinders in the short term.

At the same time, restaurants are under growing tax scrutiny. According to a government press release, the Income Tax Department analysed transaction data from about 1.77 lakh restaurants using AI-enabled tools and found discrepancies between actual transactions and declared turnover. Surveys conducted on 62 restaurants across 46 cities in 22 states on 8th March, 2026, revealed preliminary sales suppression of about Rs 408 crore. In addition, authorities have also launched the “SAKSHAM NUDGE” campaign. They are urging nearly 63,000 restaurants to update returns before 31st March, 2026, if discrepancies exist.

Another pressure point is the crackdown on mandatory service charges. The government has clarified that restaurants cannot automatically add service charges to bills or force customers to pay them. Additionally, authorities have already acted against several establishments, including 27 restaurants in January 2026. This comes after the Delhi High Court supported the consumer watchdog’s stance that tipping must remain voluntary.

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