Ask an investor pitching a new factory in any Indian state which incentive matters most, and the phrase that comes back almost everywhere is the same: SGST reimbursement. Tamil Nadu offers it. So do Rajasthan, Punjab, Odisha, Maharashtra, Telangana, Andhra Pradesh, Madhya Pradesh, Haryana, Chhattisgarh, Jharkhand, Himachal Pradesh, Assam and Bihar — fourteen states in this piece alone, and almost certainly more beyond it. Karnataka and West Bengal are the clean exceptions: Karnataka runs a capex- or turnover-linked scheme instead, and West Bengal formally revoked every state industrial incentive scheme it had in 2025.

The name is a bit of a misnomer. No state can literally refund GST. GST is one tax, administered uniformly under Article 279A by the GST Council, and a state cannot unilaterally alter what it collects or hand back through the tax system what a company has paid into it. What every one of these fourteen schemes actually does is different, and more roundabout: the industries department — not the tax department — pays a cash subsidy from the state's own budget, sized with reference to the State GST (SGST) the investor's unit has generated, for a fixed number of years, up to some cap. It is a subsidy calculated in lieu of SGST, not a tax refund, and that distinction is not pedantic — it is the entire reason the mechanism exists in its current form, and the reason getting paid turns out to be a state-budget claims process, not an automatic tax adjustment.

Why a subsidy, not a refund

Before GST, states ran their own sales tax (and, before that, the Central Sales Tax regime), and could exempt or defer that tax for a new investor almost however they liked — a straightforward, state-controlled lever. GST subsumed that entirely: since July 2017, a State GST rate is fixed nationally by the GST Council, collected the same way everywhere, and a state has no legal mechanism to waive or refund it for one company without breaking the "one tax, one base" design GST was built on.

States found a workaround almost immediately, and it is now the standard template nationwide: keep the old sales-tax-exemption logic, but fund it as an ordinary budget line instead of a tax carve-out. The investor still pays full SGST like any other business, through the normal GST return. Separately, the state's industries department calculates what that unit's net SGST — SGST paid in cash, after input tax credit is used up — came to over a claim period, and pays out a matching subsidy under the terms of its own industrial policy. Jharkhand's own scheme history shows the lineage plainly: its 2016 investment policy offered 75% reimbursement of "Net VAT" for large projects; after GST arrived, the same clause was simply re-worded to read "75% of SGST paid" and kept running. A PwC tax-insights note from August 2021, describing an updated Chhattisgarh scheme, uses the formal name several states apply internally: "investment subsidy in lieu of net SGST." That phrase is the most accurate description of what all fourteen schemes below are — a state-funded payment shaped like a tax refund, not one.

Sources: constitutional basis for GST Council rate uniformity, Article 279A; Jharkhand policy lineage per Atibir Industries Co. Ltd. v. State of Jharkhand case history (see below); "Investment subsidy in lieu of net SGST," PwC Tax Insights, 20 August 2021.

The menu, state by state

Terms below are each state's own stated policy language — drawn from state government portals and policy documents surfaced via search, not independently opened and read line by line for every state (see Sources and caveats). Where sources gave conflicting figures for the same category, both are noted with an asterisk rather than silently picking one.

*Flagged rows are where this piece found genuinely conflicting figures across the secondary sources available and could not resolve them against the primary policy notification — see Sources and caveats.

The states that don't play this game

Two states in the comparison set above are conspicuous by what they don't offer. Karnataka's Industrial Policy 2025–30 gives investors a choice between a capital subsidy (10–25% of fixed assets, by zone) or a turnover-linked payout (1.0–2.5% of net sales turnover for 7 years) — no SGST-linked track at all. West Bengal went further: every state industrial incentive scheme it had, SGST-linked or otherwise, was formally revoked via Gazette Bill No. 5 of 2025, retroactive to each scheme's original notification date. Gujarat's flagship Viksit Gujarat Industrial Policy 2026 is also not built around SGST reimbursement — it runs a tiered capital subsidy (35% up to 40–50% by investor category) plus a semiconductor-specific capex top-up — though an older, narrower Gujarat scheme has separately been described (in a single secondary source, not independently verified for this piece) as offering a 70% net-SGST refund over 10 years to one specific investor category. Uttar Pradesh runs a large capital-subsidy top-up for semiconductor investment (₹7,037 crore to Tarq Semiconductors under its ISM top-up scheme), but this piece did not find confirmed terms for a general, economy-wide SGST reimbursement track in UP and does not claim one exists.

Getting paid is the part states don't advertise

A policy document promising "100% SGST reimbursement" describes an entitlement, not a payment. Three separate pieces of evidence, from three different states, show what actually happens when an investor tries to collect.

Telangana: a multi-thousand-crore backlog that survived a change of government

By December 2023, the outgoing BRS government had left ₹3,736 crore in unpaid industrial incentive arrears — ₹3,007 crore owed to small and medium industries, ₹728 crore to mega industries — per Deccan Chronicle's reporting at the time. Fourteen months later, in January 2025, the incoming Congress government's own Director of Industries, Dr G. Malsur, told BizzBuzz News that cumulative pending incentive arrears dating back to 2016 stood at ₹4,250 crore, with a plan to clear MSME dues first. The backlog is not disputed by either administration — it is stated by the state's own industries department, across a change of government, as a known and growing number.

Jharkhand: a Supreme Court case still open

Jharkhand's 2016 industrial policy promised 75% reimbursement of Net VAT (later reworded to Net SGST) for large projects over 7 years. A March 2019 notification then added a restriction: reimbursement would be cut if the investor's buyer had claimed input tax credit on the sale — on the reasoning that a downstream ITC claim reduced the state's own net SGST take. Atibir Industries Co. Ltd, a large project that had already qualified under the original 2016 terms, challenged the restriction. The Jharkhand High Court found the 2019 notification legally unsustainable and directed the state to release the withheld reimbursement, including ordering the tax department to accept refund applications — manually, if the GST portal itself would not process them. The state has since taken the case to the Supreme Court: Special Leave Petition (Civil) 21029/2024 was last heard on 25 September 2025 and remains pending.

Bihar: a court had to order the state to pay

A plastic-furniture manufacturing unit in Hajipur, Vaishali, had its investment approved by Bihar's State Investment Promotion Board on 21 July 2010 under the state's 2011 Industrial Incentive Policy. A later amendment attempted to strip incentives retroactively. In a 2024 ruling, the Patna High Court held that a subsequent policy amendment cannot override incentives already promised to a unit that qualified under the earlier terms, and directed the state to pay the withheld SGST/VAT reimbursement for April–September 2021 within four weeks. The investor had to litigate to collect roughly six months of a payment the state's own earlier policy had already promised.

Sources: Telangana arrears — Deccan Chronicle (Dec 2023 reporting on BRS-era dues) and BizzBuzz News (Jan 2025, quoting Director of Industries Dr G. Malsur), both secondary news reporting, not independently verified against a state budget document. Jharkhand — Jharkhand High Court ruling and Supreme Court SLP (Civil) 21029/2024 docket status, both corroborated across multiple legal case-summary sites (JSA Newsletter, TaxO, Indian Kanoon); the underlying judgments were not independently opened for this piece. Bihar — Patna High Court 2024 ruling per a law-firm case summary (samvidalaw.com); the underlying judgment, publicly available at patnahighcourt.gov.in, was not independently opened for this piece.

Three states are rewriting the rules while investors are mid-decision

An investor evaluating where to put capital right now is comparing published terms that, for three of the fourteen states above, are actively in flux. Haryana's long-running HEEP 2020 scheme expired at the end of 2025; a replacement, "Make in Haryana" Industrial Policy 2026, was approved by cabinet on 18 May 2026, scrapping the old district-block classification system entirely, but its detailed SGST sub-scheme notifications were, per the sources checked for this piece, still pending as of this writing. Jharkhand's JIIPP 2021 remains the legally operative policy, but a JIIPP 2026 draft was released for public consultation in July 2026 and could change the terms an investor commissioning a unit over the next year or two actually receives. Himachal Pradesh's situation is furthest along the spectrum: its 2019 investment policy lapsed on 31 December 2025, has been extended twice on a short-term basis (most recently to 12 October 2026), and the state's own chief minister said in July 2026 that a replacement policy was "in final stages" — without giving investors any visibility into what its SGST terms will actually be.

None of this means the schemes are unreliable in the way the Telangana or Bihar cases show delivery can be unreliable. It means something narrower but still material: for a company deciding today where to build a factory that will start production in two or three years, "the current policy says X" is, in three of these fourteen states, a genuinely moving target.

Sources and caveats

This piece was researched via web search rather than by opening and reading every state's primary policy PDF end to end — the network environment this research was conducted in blocked direct fetches to every .gov.in domain and most state investment-portal domains tried, for both government and secondary sources alike. Where a figure is stated in this piece, it reflects the most consistent version found across the secondary sources retrieved (consultancy tax-advisory summaries, state investment-portal search snippets, and news coverage), not an independent reading of the underlying gazette notification or policy PDF. Rows and figures marked with an asterisk in the comparison table are ones where multiple sources gave genuinely conflicting numbers that could not be reconciled from what was available — readers relying on this piece for an actual investment decision should verify the current terms directly against the state's own official industrial-policy notification before acting, not against this table. Tamil Nadu, Rajasthan, Punjab, Odisha, Karnataka, West Bengal and Gujarat's headline scheme were previously researched and published on this blog in more depth (see "India's State Incentive War," linked below); the other ten states' figures were compiled specifically for this piece and carry the confidence caveats noted in-line and in the table. This article does not recommend any investment, business, or policy decision; nothing here is investment or policy advice.

About this article: Researched, written and edited by Umashankar Triplicane Dwarakanathan, with AI research assistance; every figure is meant to trace to the primary source cited. See the Editorial Policy for how sourcing, AI use and corrections work.