AP Govt links industrial incentives to SGST

Amaravati: The state government has approved an escrow-based mechanism to release industrial incentives to eligible large and mega industrial units, linking the amount routed into a consolidated escrow account to the net State Goods and Services Tax (SGST) generated by participating units. The industries and commerce department approved the mechanism under the Andhra Pradesh Industrial Development Policy 4.0 (2024–29). The system will become operational from November 12 with detailed implementation guidelines to be issued soon.

The mechanism follows Chief Minister N Chandrababu Naidu’s announcement at the 30th CII Partnership Summit in Visakhapatnam in November 2025. The government said large and mega industries contribute substantially to the State’s SGST revenues, creating scope for linking incentive disbursement to the revenue generated by beneficiary units.

Under the approved framework, eligible projects approved and commissioned after June 2024, including projects approved by the State Investment Promotion Board (SIPB), can participate voluntarily by applying for government approval. Eligibility will be confirmed only after commercial production begins, based on actual net SGST accruals. A consolidated escrow account will be opened and operated by the director of industries. Net SGST attributable to a participating unit will be routed into the account from the start of construction, or from any earlier SGST-generating activity associated with the approved plant, as applicable.

For each participating unit, the government will prescribe a project-specific ceiling equal to the total incentives approved for that investment in the relevant government order. SGST-linked amounts will be routed into the escrow account until the cumulative amount reaches this ceiling. Thereafter, further routing will stop and all subsequent SGST generated by the unit will accrue directly to the State exchequer.

The government has clarified that the escrow mechanism is an additional channel for funding and releasing incentives, not an exclusive one. Eligible incentives may continue to be released through budgetary allocations or other approved means.

Participation will not confer any lien, charge, guarantee or other right over the consolidated escrow funds, and no interest will be payable for delays in releasing amounts. The government said the framework was intended to improve the predictability and timeliness of incentive payments, strengthen investor confidence, particularly among foreign investors, and ensure fiscal prudence through a transparent funding mechanism.

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