Manufacturing Company Registration in India: PLI, SEZs & the 15% Tax Rate

Few sectors have as substantial a package of government incentives behind them as manufacturing in India — direct cash incentives, a concessional tax rate, and duty-free zones, on top of the standard case for setting up in India. This guide covers what is actually available and how to register the entity that can access it.

The Production Linked Incentive (PLI) scheme

The PLI scheme pays eligible manufacturers a direct cash incentive of 4% to 18% on incremental sales, across 14 priority sectors — electronics, pharmaceuticals, auto components, textiles, solar PV, batteries and more — with a combined outlay of roughly ₹1.97 lakh crore (around US$23 billion). This is real cash paid against actual sales growth, not a tax deferral or a one-time grant, which is why it has become central to how many global manufacturers now think about setting up production capacity in India. Eligibility criteria, rates and thresholds vary significantly by sector, so mapping your specific product category against the scheme details is one of the first things worth doing before you commit to a location or scale. Pharmaceutical manufacturers have their own dedicated PLI tranches on top of the general scheme — see our pharma & healthcare company registration guide for the specifics.

The 15% concessional tax rate for new manufacturing companies

Under Section 115BAB of the Income Tax Act, a new manufacturing company incorporated after 1 October 2019 can elect into a concessional 15% corporate tax rate — an effective rate of roughly 17.16% once surcharge and cess are added — well below the standard 30% domestic company rate, provided it does not claim certain exemptions or deductions and commences production within the applicable statutory deadline. Only a company taxed as a domestic Indian entity can access this rate, which is one of the clearest financial reasons foreign manufacturers incorporate a Wholly Owned Subsidiary rather than operate through a Branch Office — a Branch Office is taxed as a foreign company at 35% and has no access to Section 115BAB at all.

Special Economic Zones and sector-specific programmes

Units operating within one of India's 276 operational Special Economic Zones get duty-free imports of capital goods and raw materials, plus zero-rated GST on inputs — benefits that stack alongside, rather than instead of, the PLI scheme and the Section 115BAB tax rate. Electronics and semiconductor manufacturing carry their own additional layer of support beyond the general PLI framework, including fiscal assistance of up to 50% of project cost for fabs and assembly/testing facilities under the Semicon India Programme — reflecting how specifically India has prioritised this sub-sector.

Choosing your entity and location

A Wholly Owned Subsidiary is the standard route for a foreign manufacturer, since it is taxed as an Indian company and can access both the PLI scheme and the Section 115BAB rate. Where you physically locate production matters too — beyond SEZ eligibility, several individual states run their own industrial policies and land incentives on top of the central schemes above; see our guides to company registration in Gujarat, Maharashtra and Tamil Nadu — three of India's largest manufacturing states — for what each offers specifically.

Incorporation process

The core incorporation sequence — DSC and DIN issuance, name reservation via SPICe+ Part A, drafting your MOA and AOA, and SPICe+ Part B filing — is the same for a manufacturing company as for any Indian private limited company. See our step-by-step incorporation guide for the full walkthrough, and our guide to FLA Return and transfer pricing compliance for the annual filings that follow for a foreign-owned subsidiary.

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