Setting up or expanding a factory in Uttar Pradesh involves land, approvals, capital and compliance. The UP Industrial Investment and Employment Promotion Policy 2022 is the state’s main incentive framework for industrial investors. It offers stamp duty exemption, capital subsidy, Net SGST reimbursement and PLI top-up, with extra support for R&D, infrastructure projects and private industrial parks.
This guide summarises the key features of the policy as published by Invest UP, and explains what investors should prepare from a tax and compliance point of view.
What Is the UP Industrial Investment & Employment Promotion Policy 2022?
The UP Industrial Investment and Employment Promotion Policy 2022 is a policy of the Government of Uttar Pradesh that encourages large-scale industrial investment and job creation across the state. Its nodal agencies are Invest UP, UPSIDA and IIDD. The policy is published in English and Hindi on the Invest UP website, along with Government Orders (GOs), SOPs and implementation guidelines.
The policy is designed for large, mega, super mega and ultra-mega projects, not for small units.
Project Categories Under IIEPP 2022
The incentives depend on the size of the capital investment:
| Category | Capital Investment |
|---|---|
| Large | Above ₹50 Cr but below ₹200 Cr |
| Mega | ₹200 Cr or above but below ₹500 Cr |
| Super Mega | ₹500 Cr or above but below ₹3,000 Cr |
| Ultra-Mega | ₹3,000 Cr or above |
The category decides your subsidy percentage, the number of years over which it is paid, and the annual ceiling.
Stamp Duty Exemption
Stamp duty exemption is linked to the region where the unit is set up:
- 100% in Bundelkhand and Poorvanchal
- 75% in Madhyanchal and Paschimanchal (except Gautam Buddh Nagar and Ghaziabad)
- 50% in Gautam Buddh Nagar and Ghaziabad
For land-heavy projects, this is a significant saving at the start. The state has also issued GOs (April 2023 and November 2023) on the process for claiming it.
Investment Promotion Subsidy: Choose One of Three Options
Under the policy, an investor chooses one of three mutually exclusive options at the time of application. The policy also gives one additional chance to change the option after the application has been processed by the Evaluation Committee, while it is pending approval of the High-Level Empowered Committee or the Empowered Committee, as the case may be.
Option 1: Capital Subsidy with Boosters
The formula is:
Capital Subsidy = Base Capital Subsidy × Gross Capacity Utilisation Multiple (GCM) + Additional Capacity Subsidy (boosters)
The base subsidy is a percentage of Eligible Capital Investment (ECI), paid in equal annual instalments. The rates are highest in Bundelkhand and Poorvanchal:
| Region | Large | Mega | Super Mega | Ultra-Mega |
|---|---|---|---|---|
| Gautam Buddh Nagar & Ghaziabad | 10% over 10 yrs | 18% over 12 yrs | 20% over 15 yrs | 22% over 20 yrs |
| Madhyanchal & Paschimanchal (rest) | 12% over 10 yrs | 20% over 12 yrs | 22% over 15 yrs | 25% over 20 yrs |
| Bundelkhand & Poorvanchal | 15% over 10 yrs | 22% over 12 yrs | 25% over 15 yrs | 30% over 20 yrs |
| Annual ceiling | ₹5 Cr | ₹10 Cr | ₹50 Cr | ₹150 Cr |
| Annual ceiling with boosters | Not applicable | ₹15 Cr | ₹75 Cr | ₹210 Cr |
Capacity utilisation (GCM). GCM is the lower of 75% and the peak capacity utilisation of the year, divided by 75%. In the first year, GCM is taken as 1 if the unit achieves 40% of installed capacity. In later years it is 1 if peak utilisation is 75% or more, and is reduced proportionately if utilisation falls below 75%.
Three boosters can increase the subsidy:
- Employment Booster. Applies to Mega, Super Mega and Ultra-Mega projects. The minimum average annual employment is 300, 600 and 1,500 respectively. The booster is 2% for meeting the minimum, 3% for employing more than twice the minimum, and 4% for more than three times. The booster is also available if women make up 75% of the relevant employment level.
- Exports Booster. Based on the share of export revenue in total revenue: 2% of ECI at 25% or more, 3% at 50% or more, and 4% at 75% or more.
- Ecosystem Booster. For sourcing raw material or inputs from manufacturing units within Uttar Pradesh: 2% of ECI for 40% to 60% of requirement, 3% for 60% to 75%, and 4% for more than 75%.
Option 2: Net SGST Reimbursement
Under this option, the state reimburses 100% of the net SGST deposited in the state’s account, subject to ceilings. The reimbursement period is 6 years for Large, 12 for Mega, 14 for Super Mega and 16 for Ultra-Mega projects.
The ceilings are expressed as a percentage of ECI. For example, in Bundelkhand and Poorvanchal, the overall ceiling is 100% of ECI for Large projects and 300% for Mega and above. In Gautam Buddh Nagar and Ghaziabad, the overall ceiling is 80% of ECI for all categories. The state issued an SOP for Net SGST reimbursement in November 2024.
Option 3: PLI Top-Up
Units that receive incentives under a Government of India Production Linked Incentive (PLI) scheme can get a top-up of 30% of the PLI incentive as and when it is disbursed by the Centre. The total is capped at 100% of ECI.
Other Benefits Under the Policy
Case-to-case incentives. For projects of special importance, the government may offer a customised package, subject to Cabinet approval of the kind of projects eligible. An amendment to the application rules was issued in April 2024.
R&D and intellectual property. The policy reimburses 25% of expenditure, up to ₹10 Cr, for standalone R&D units (a maximum of 10 units over the policy period). It also reimburses 50% of the cost of registering patents, copyrights, trademarks and Geographical Indications, up to ₹1 Cr.
Centres of Excellence. A grant of 50% of project cost, up to ₹10 Cr, for eligible private, PSU or government Centres of Excellence, limited to 10 across the policy period and 2 per sector.
Infrastructure projects. Mega and above projects such as pumped storage plants can get stamp duty reimbursement and the base capital subsidy, without GCM or boosters.
Private industrial parks. Developers of parks with at least 5 units, where no single unit occupies more than 80% of allocable area, can receive:
- Capital subsidy of 25% of ECI (excluding land cost), up to ₹40 Cr in Madhyanchal and Paschimanchal and ₹45 Cr in Bundelkhand or Poorvanchal for parks of 20 or 30 acres and above, and up to ₹80 Cr for parks above 100 acres
- Capital subsidy of 25% of the cost of worker hostels or housing, up to ₹25 Cr (₹50 Cr for parks above 100 acres)
- 100% stamp duty exemption on land purchase
- Payment in stages: 70% on completion of park development, 10% on completion of plot allotment, and 15% after units begin commercial operations
Land support. The policy provides fast-track land allotment for Super Mega and above projects. It also covers certain Mega projects, such as those with 100% FDI or companies listed in the Fortune Global 500, ET 200 or Forbes Global 2000/Asia 200 for three consecutive years. It also supports land aggregation for large private parks and measures to build a land bank.
Why Tax and Compliance Planning Matters
Several features of IIEPP 2022 depend directly on financial records and tax compliance:
- ECI is the base for almost every subsidy, so capital expenditure must be properly documented and classified.
- Net SGST reimbursement depends on GST returns, input tax credit and tax actually deposited. Errors in GSTR-1, GSTR-3B or ITC reconciliation can affect the amount you claim.
- Capacity utilisation, export share, local procurement and employment figures decide your boosters, so you need clean, auditable data.
- Choosing between the three options is a financial decision. A capital-intensive unit with modest taxable sales may prefer the capital subsidy, while a high-turnover unit may gain more from SGST reimbursement.
We recommend that investors plan this before filing the application, because the choice of option can be changed only once.
How Sagar S Gupta & Co Can Help
Sagar S Gupta & Co is a Chartered Accountants firm in Shivpur, Varanasi, serving clients since 2017 and led by CA Sagar Gupta (FCA, ACS, LLB, B.Com (Hons)), registered with ICAI.
For investors looking at IIEPP 2022, we can assist with:
- Project cost structuring and ECI documentation
- Comparing the three incentive options based on your financials
- GST compliance and ITC reconciliation to support Net SGST claims
- Company or LLP incorporation, ROC and company law compliance
- Income tax, audit and accounting support
Frequently Asked Questions (FAQ)
1. Who can apply under IIEPP 2022?
Industrial units whose capital investment falls in the Large (above ₹50 Cr), Mega, Super Mega or Ultra-Mega categories. Private industrial park developers, infrastructure projects, R&D units and Centres of Excellence have separate provisions.
2. Can I claim more than one of the three subsidy options?
No. You choose one of capital subsidy, Net SGST reimbursement or PLI top-up. You get one additional chance to change the option after the Evaluation Committee has processed your application and it is awaiting approval.
3. What is ECI?
ECI stands for Eligible Capital Investment. It is the base on which capital subsidy, boosters and several ceilings are calculated. The exact items that count are defined in the policy and its implementation guidelines.
4. What is the Gross Capacity Utilisation Multiple (GCM)?
GCM links the capital subsidy to how well your plant is used. It is 1 in the first year if you reach 40% of installed capacity, and 1 in later years if peak utilisation is 75% or more. Below 75%, it is reduced proportionately.
5. How does the Net SGST reimbursement work?
The state reimburses 100% of the net SGST you deposit, for 6 to 16 years depending on category, subject to annual and overall ceilings as a percentage of ECI.
6. Does the policy offer stamp duty exemption?
Yes: 100% in Bundelkhand and Poorvanchal, 75% in Madhyanchal and Paschimanchal (except Gautam Buddh Nagar and Ghaziabad), and 50% in Gautam Buddh Nagar and Ghaziabad.
7. Are there benefits for exporters and women employment?
Yes. The Exports Booster gives 2% to 4% of ECI depending on export share, and the Employment Booster recognises projects where women make up 75% of the relevant employment level.
8. Where can I find the official policy and Government Orders?
On the Invest UP website, which carries the English and Hindi policy documents, the 2023 guidelines for fiscal incentives, SOPs for infrastructure and private industrial parks, and later GOs. Applications are handled through the Nivesh Mitra single window system.
9. Does a CA need to be involved in the application?
Applications of this kind generally need financial data and certifications on investment, turnover, GST and employment. Please check the exact requirements in the latest GO and guidelines, and involve your CA early.
Conclusion
IIEPP 2022 gives industrial investors a wide range of incentives, from stamp duty exemption to capital subsidy, SGST reimbursement and PLI top-up. The benefit you receive depends on the option you choose, your region, project category and the quality of your financial records.
Disclaimer: This article is for general information based on the Invest UP policy page. Incentive terms, eligibility, ceilings and procedures are governed by the official policy, Government Orders and amendments, which may change. Please consult a professional before making investment or application decisions.