The Department for Promotion of Industry and Internal Trade (DPIIT) has initiated Phase-II compliance audits of PLI scheme beneficiaries across auto, electronics, pharmaceuticals and textiles sectors since late April 2026. These audits focus on actual production versus committed targets, capex deployment, and genuine domestic value addition.
Manufacturers who secured PLI approval must now demonstrate real performance—not just applications. Lapses in documentation or underachievement against contracted milestones can trigger subsidy recovery notices.
Market signals
DPIIT is cross-referencing GST returns, excise filings, and export shipment data against PLI commitments. Discrepancies between claimed and verified output now trigger immediate notices.
Auditors are validating actual capital expenditure through bank statements, vendor invoices, and asset registries. Inflated or delayed capex claims are leading to proportional subsidy reduction.
Phase-II reviews now enforce stricter local value-addition thresholds than Phase-I. Manufacturers using imported intermediates beyond permitted limits face clawback of disbursed incentives.
PLI clawback is now a material compliance risk. Unlike earlier years, DPIIT is aggressively matching GST ITC claims, Form-3CD (CA certificate) capex certifications, and export invoices against PLI undertakings. Vinayakam Consultants helps manufacturers reconcile their statutory filings (GST, income tax, ROC) with PLI commitments, prepare auditable capex registers, and pre-emptively identify compliance gaps before DPIIT notices arrive. We also advise on production acceleration and domestic sourcing restructuring to meet revised Phase-II thresholds.
Your action checklist
- Audit all GST ITC claims (last 24 months) against PLI production commitments; flag mismatches in quantity or timelines to internal compliance team immediately.
- Commission a third-party capex audit: reconcile bank statements, invoice registers, and fixed-asset ledgers with PLI capex schedules filed at approval; prepare a signed auditor certificate.
- Map domestic vs. imported raw material and component purchases; calculate local value-addition % against PLI undertaking; identify suppliers to switch or certify for higher domestic content.
- Schedule a pre-audit review with your statutory auditor and tax counsel; prepare a reconciliation schedule of all PLI-linked transactions from approval date to 31 May 2026.
Frequently asked questions
DPIIT cross-references your GST returns and export data against PLI commitments. Underachievement against contracted milestones can trigger subsidy recovery notices and proportional clawback of disbursed incentives.
Auditors validate actual capital expenditure through bank statements, vendor invoices, and asset registries. Inflated or delayed capex claims lead to proportional subsidy reduction.
Phase-II enforces stricter local value-addition thresholds than Phase-I. Manufacturers using imported intermediates beyond permitted limits face clawback of disbursed incentives.