After approval of the DPR under a Production Linked Incentive Scheme such as M-SIPS/SPECS by the respective Ministry or designated authority, the applicant receives an approval letter along with the approved list of capital assets and the prescribed timeline within which the required investment is to be made.

Thereafter, upon commencement of production and fulfilment of the prescribed eligibility conditions for disbursement, the applicant is required to submit the disbursement claim application in the prescribed format along with the requisite documents, certificates, invoices, financial records, and other supporting documents as required under the scheme guidelines.

Upon submission of the disbursement claim application along with the requisite documents and certificates, the concerned Ministry/Department or designated verification agency will conduct a preliminary scrutiny of the claim.

Thereafter, a verification/audit team will be appointed for verification of documents, financial records, capital expenditure, books of accounts, and physical inspection/site visit of the project and manufacturing facility before processing the eligible incentive amount for disbursement.

Practical Challenges in Disbursement of Incentive Claims

However, in practical implementation, many companies face delays, deficiencies, or rejection at the disbursement stage due to inadequate documentation, mismatch in claim data, non-maintenance of proper books of accounts, non-availability of supporting invoices and payment proofs, non-capitalisation of claimed expenditure, deviations from approved capital expenditure, and failure to submit documents and certificates in the prescribed government formats.

As per the government disbursement guidelines, the applicant is required to maintain separate books of accounts, submit item-wise claim details, provide CA/CS/Chartered Engineer/Cost Accountant certificates, maintain proper records of invoices, vouchers, asset registers, purchase orders, and payment proofs, and ensure that all expenditure is within the approved project scope and timelines. In many cases, lack of prior experience in handling such technical disbursement assignments and inability to properly reconcile financial, technical, and compliance records result in extensive queries, audit observations, repeated clarifications, and delay in release of incentives.

Further, companies also face practical difficulties in properly addressing and replying to queries, observations, and clarification requests raised by the Ministry, verification agencies, or intermediary financial institutions due to the technical nature of scrutiny, documentation requirements, and reconciliation of financial and project records.

Suggested Approach to Avoid Delays

In order to avoid such delays, deficiencies, audit objections, and rejection of claims, companies may opt for Disbursement Claim Review Audit Services before submission to the concerned Ministry or intermediary financial institution. Under the government guidelines, the disbursement claim requires detailed verification of capital expenditure, invoices, payment proofs, books of accounts, statutory certificates, asset registers, and compliance with approved project timelines and prescribed formats.

Pre-audit helps in identifying discrepancies, reconciliation issues, missing documents, non-compliance with approved capex, and gaps in supporting records before official scrutiny, thereby reducing the risk of queries, delays, repeated clarifications, and withholding of incentive disbursement by authorities.