BIRAC BIG grant utilisation certificate and milestone disbursement rules

The Biotechnology Ignition Grant (BIG) gives early-stage biotech and health-tech ventures up to ₹50 lakhs in grant-in-aid over 18 months, released in four milestone-linked tranches through a BIRAC-empanelled BIG Partner. Getting the money approved is the easy part. Keeping it flowing on schedule depends entirely on how cleanly the grantee runs its no-lien bank account, prepares its utilisation certificate in the prescribed GFR 12-A format, and answers the accounting and tax questions that come with treating a government grant as company income. Health-tech AI startups building diagnostics, medical devices or clinical decision-support tools are a growing share of BIG grantees, and most of them are running this compliance layer with a two-person finance team or none at all. This article sets out exactly what BIRAC’s rules require at each stage, and where founders most often lose time or money.

What is a utilisation certificate for a BIRAC BIG grant?

A utilisation certificate (UC) is a formal statement, filed in Form GFR 12-A under Rule 238(1) of the General Financial Rules 2017, in which the grantee certifies that grant money released for a specific period was spent only on the sanctioned project, in line with the approved budget heads, and that unspent balances are correctly carried forward or refunded. For BIG grantees, the BIG Partner requires a UC alongside every Quarterly Progress Report (QPR) before it recommends the next milestone tranche to BIRAC.

How does BIRAC release BIG grant funds across milestones?

BIRAC does not disburse the ₹50 lakh BIG grant as a lump sum. It is staged into four tranches tied to signing the agreement and completing two technical milestones, with the balance released as reimbursement after the final project report is accepted. This structure exists so BIRAC’s exposure at any point matches the work actually completed, not the work promised at proposal stage.

The indicative split, as set out in the BIG Scheme Guidelines, is as follows.

Table: BIG grant milestone disbursement structure

Two things follow directly from this structure. First, every tranche after the first is conditional on the previous milestone being both technically completed and financially accounted for, which means a delayed UC can hold up a technically completed milestone. Second, the last tranche is explicitly a reimbursement, so the grantee has to fund the final stretch of the project from its own resources before BIRAC releases the closing amount. A health-tech AI startup validating a diagnostic algorithm against a clinical dataset in month 16 needs to have budgeted for that gap, because the BIG grant will not cover it in real time.

What the GFR 12-A utilisation certificate must show for each tranche

The GFR 12-A format was designed for government grantee institutions generally, and BIG Partners adapt it for BIG grantees rather than inventing a separate template. Every UC a grantee files has to reconcile four figures for the reporting period: the opening balance in the no-lien account, the grant amount received from BIRAC through the BIG Partner, the amount actually spent against sanctioned budget heads, and the closing balance carried forward.

Beyond the numbers, GFR 12-A requires a set of signed certifications from the grantee. These typically confirm that:

• The accounts and subsidiary registers for the grant have been maintained separately and are available for audit
• Internal controls exist to safeguard the grant funds and to track physical progress against financial spend
• No transaction has been entered into in violation of the BIG Scheme Guidelines or the terms of the Grant-in-aid Agreement
• The expenditure was incurred only under the budget heads sanctioned at the due diligence stage (equipment, manpower, consumables, incubation costs, travel, outsourced services, IP costs and contingency)
• Where the reporting period closes at financial year end, the figures tally with the entity’s audited financial statements

For a company or LLP grantee (as opposed to an individual), this last point matters more than founders expect. If your BIG grant spans two financial years, the UC for the period ending 31 March has to agree with the audited books, not with an internal spreadsheet that has not yet gone through the statutory audit. Startups that treat the grant account as a side ledger, reconciled only when the BIG Partner asks for it, routinely find a mismatch between what they reported quarterly and what the auditor signs off on annually.

An anchor question worth answering directly

Which document actually closes out a milestone with the BIG Partner: the Quarterly Progress Report or the utilisation certificate? Both. BIRAC’s monitoring process requires a Quarterly Progress Report (QPR) and a utilisation certificate for the same period, and the BIG Partner reviews them together before recommending fund release. A completed milestone with an incomplete or unaudited UC does not trigger disbursement on its own.

Why does BIRAC require a separate no-lien bank account?

Every BIG grantee, whether an individual, a company or an LLP, has to open a separate, auditable, no-lien bank account with a scheduled bank solely to receive and spend BIG grant funds. A no-lien account means the bank cannot set off any other liability of the grantee, such as an overdraft or a loan default, against the balance sitting in that account. This protects BIRAC’s grant-in-aid from being absorbed into the grantee’s general working capital exposure if the company runs into financial difficulty elsewhere.

In practice, this account has three operational consequences for a health-tech startup’s finance function.

• Every grant-funded transaction, from a lab consumables purchase to a contract researcher’s invoice, has to be routed through this account and tagged to the correct budget head, because the UC is built directly from this account’s ledger
• Interest earned on the balance in the no-lien account belongs to the project, not to the company’s general reserves, and BIG Partners typically require this interest to be reported and either adjusted against the next tranche or refunded at project closure
• Mixing grant funds with the company’s operating account, even temporarily to cover a payroll timing gap, breaks the audit trail that the UC depends on and is the single most common reason a BIG Partner flags a UC for clarification before recommending the next release

Founders running their first institutional grant often treat this account as a formality opened once and forgotten. BIRAC’s monitoring, and by extension the BIG Partner’s due diligence before each tranche, treats it as the primary evidentiary record for the entire engagement.

What does a BIG Partner check before releasing the next milestone tranche?

The BIG Partner, not BIRAC directly, is the body that verifies milestone completion and recommends fund release. Its due diligence at each tranche typically covers three layers: technical verification that the milestone deliverable was achieved, financial verification that spend matches the sanctioned budget, and compliance verification that the grantee’s structure and reporting obligations remain intact.

Table: What a BIG Partner typically verifies before recommending a tranche

Budget head caps are a frequent source of friction here. Equipment cannot exceed 30% of project cost, manpower is capped at roughly 30% with a per-head salary ceiling of ₹50,000 per month, outsourced services cannot exceed 30% of project cost, and contingency is capped at 5%. A health-tech AI startup that reallocates budget toward, say, cloud compute costs classified loosely under consumables, without a formal request to the BIG Partner, risks having that spend questioned at UC stage even though the underlying activity was legitimate. Any reallocation across budget heads needs the BIG Partner’s prior concurrence, not a retrospective explanation in the UC.

Is the BIRAC BIG grant taxable income for your startup?

Yes, in almost all cases. Under Section 2(49) of the Income-tax Act 2025 (the corresponding provision under the Income-tax Act 1961, applicable for tax years up to FY 2025-26, is Section 2(24)(xviii)), any subsidy, grant or cash incentive received from the Central Government or a government agency is treated as income of the assessee, unless it falls within a specific carve-out. The two carve-outs are narrow: grants adjusted against the actual cost of a depreciable asset under Section 39(1)(d) and (3) of the Income-tax Act 2025 (Explanation 10 to Section 43(1) under the 1961 Act), and grants given for the corpus of a government-established trust.

For most BIG grantees, this plays out in two ways depending on the budget head the spend falls under.

• Grant funds spent on manpower, consumables, incubation rentals, travel and outsourced services are revenue in nature and are recognised as income of the company for the tax year in which they are utilised, matched against the corresponding expenditure. Accounting standards (Ind AS 20 or AS 12, depending on which framework the company follows) generally require this recognition to be spread over the periods in which the related costs are incurred, rather than in the year of receipt.
• Grant funds used to acquire equipment that becomes a depreciable fixed asset on the company’s books fall under the carve-out. Here, the grant amount is deducted from the actual cost of the asset for depreciation purposes rather than credited to the profit and loss account outright. Get this classification wrong at the time of purchase, and the depreciation schedule for that asset will need to be restated later.

This means a health-tech AI startup’s BIG grant is not simply “non-dilutive, non-taxable capital.” The revenue-head portion adds to taxable income in the year it is spent, and founders budgeting the grant purely against project cost, without factoring in the resulting tax outflow, frequently discover the gap only when the statutory auditor closes the year.

Does GST apply to a BIRAC BIG grant-in-aid receipt?

Generally no, but the answer depends on whether BIRAC’s grant carries a counter-obligation that looks like a service to BIRAC. Under Sections 7 and 2(31) of the Central Goods and Services Tax Act 2017, GST is levied on a “supply” made for “consideration.” A grant-in-aid that funds a startup’s own research and development, with no obligation to hand deliverables, data or intellectual property back to BIRAC as the grantor, is financial assistance rather than consideration for a supply, and generally falls outside the scope of GST.

The BIG Scheme’s structure supports this reading. BIRAC does not take assignment of the IP created under a BIG grant; the grantee retains ownership and instead pays BIRAC a 5% royalty on net sales once the product commercialises, capped at the amount of grant-in-aid disbursed. Because there is no transfer of goods, services or IP rights back to BIRAC as a condition of receiving the tranche, the grant itself does not constitute consideration for a taxable supply. This is consistent with the position CBIC has taken in Circular No. 245/02/2025-GST, which distinguishes grants that fund an institution’s own research (outside GST) from grants paid as consideration for a defined research service delivered to the grantor (inside GST).

Two situations still need case-specific review before a founder assumes the position is settled.

• If a future BIG call or a specific grant agreement introduces a data-sharing, co-publication or technology transfer obligation back to BIRAC or the BIG Partner as a condition of the grant, that obligation could be read as a counter-performance, shifting the analysis toward a taxable supply
• The royalty payment itself, once triggered by commercialisation, is a separate transaction from the grant receipt and should be evaluated independently for its own GST and withholding treatment at the time it becomes payable

Because this turns on the specific wording of the grantee’s Grant-in-aid Agreement rather than a blanket rule, a startup should have this checked against its own signed agreement before filing a GST position, rather than relying on the general scheme guidelines alone.

What happens if a startup misses a milestone or cannot fully utilise the grant?

BIG grantees who fall behind schedule or find a milestone is no longer achievable have two structured options under the scheme rather than a single default outcome, and the choice affects both the UC and the royalty exposure differently.

• A grantee can request a no-cost extension or a revision of milestones through the BIG Partner, supported by a revised project plan. BIRAC evaluates this on a case-by-case basis, and it does not by itself trigger a repayment obligation.
• Where the project is foreclosed or terminated under the terms of the Grant-in-aid Agreement, unutilised grant balance sitting in the no-lien account has to be refunded to BIRAC, and the royalty liability terminates rather than continuing to accrue.

In both cases, the final UC for the terminated or extended period is the document that fixes exactly how much was spent, how much is unspent, and therefore how much (if anything) is refundable. A startup that has been sloppy with quarterly UCs through the project will find this closing reconciliation far more painful, since it now has to account for the entire grant history in one filing rather than four periodic ones.

Common mistakes that cost health-tech founders time and money

Treating the no-lien account as optional discipline. Founders route a vendor payment through the operating account “just this once” to avoid a banking delay, then cannot cleanly reconcile that spend against the grant ledger at UC time. The BIG Partner’s due diligence team flags this immediately, and clarification cycles routinely add four to six weeks to a tranche that should have released on schedule.

Reallocating budget heads without prior BIG Partner approval. The manpower, equipment, outsourced services and contingency caps in the BIG guidelines are not advisory. Spend that crosses a cap, or that shifts from one sanctioned head to another without documented approval, gets queried at UC review and can be disallowed, reducing the amount certified as legitimately utilised.

Filing the UC from an internal spreadsheet instead of audited books. For a company or LLP grantee whose reporting period straddles a financial year end, the UC figures must tally with the audited financial statements, not a management estimate. Reconciling the two after the statutory audit is complete, rather than building the UC from audit-ready numbers in the first place, is where most last-minute delays originate.

Ignoring the tax treatment of the grant until year end. Because a large share of BIG spend falls under revenue heads (manpower, consumables, outsourced services), the corresponding grant amount is taxable income in the year it is utilised. Startups that plan cash flow purely against the ₹50 lakh headline figure, without setting aside the resulting tax liability, face a cash crunch at advance tax time that has nothing to do with the project itself.

Assuming the BIG grant has zero interaction with GST without checking the actual agreement. The general position that grant-in-aid falls outside GST holds only where there is no counter-obligation to BIRAC. Startups that later add a co-development or data-licensing clause into an amended agreement, without revisiting the GST position, risk a mismatch between how the receipt was treated and what the agreement now actually says.

In the BIG engagements we have run at Treelife

In the BIRAC BIG engagements we have run at Treelife, the pattern that costs founders the most time is not technical failure, it is a finance function that was built for a seed-stage cap table and never adapted for grant-specific bookkeeping. A no-lien account needs its own chart of accounts mapped to the sanctioned budget heads from day one, not a generic ledger that gets reclassified retrospectively when the BIG Partner asks for a UC. We have also seen founders assume the 5% royalty under the Grant-in-aid Agreement is a distant, post-revenue concern, only to have an investor’s legal team flag it as an undisclosed contingent liability during Series A due diligence, because it was never carried on the balance sheet as a note. Under Rule 238(1) of the General Financial Rules 2017, the UC is meant to be a routine certification exercise, not a forensic reconstruction. The startups that treat it that way from tranche one are the ones whose fourth and final reimbursement lands without a due diligence query.

Case Study

Situation: A pre-Series A diagnostics AI startup based in Bengaluru, running a BIG-funded project to validate an image-based screening algorithm, with a two-person finance team and no prior experience managing a government grant account.

Challenge: The company had commingled two vendor payments between its operating account and the no-lien account in month 4, had no chart of accounts mapped to the BIG budget heads, and was three weeks from its second milestone UC deadline with no audit-ready reconciliation.

What Treelife did: Rebuilt the grant ledger from bank statements to isolate and correctly re-tag the commingled transactions, set up a budget-head-mapped chart of accounts for the remaining project period, and prepared the GFR 12-A utilisation certificate alongside the statutory auditor ahead of the BIG Partner’s review window.

Outcome: The second and third milestone tranches, together worth approximately ₹15 lakhs, released on the BIG Partner’s original schedule with no clarification query, and the fourth tranche reconciliation at project close took under a week.

FAQ’s on BIRAC BIG grant utilisation certificate and milestone disbursement

Q: Is the entire ₹50 lakh BIG grant taxed in the year BIRAC disburses it?
A: No. Tax follows utilisation, not disbursement. Grant amounts spent on revenue heads such as manpower or consumables are recognised as income in the year the corresponding expenditure is incurred under Section 2(49) of the Income-tax Act 2025, while amounts spent on depreciable equipment reduce that asset’s cost for depreciation instead of hitting the profit and loss account directly.

Q: Does BIRAC deduct TDS before releasing a milestone tranche?
A: No. The BIG grant is a grant-in-aid, not a payment for services rendered to BIRAC, so it is not a payment covered under the TDS provisions of the Income-tax Act. TDS obligations arise separately, on the grantee’s own side, when the grantee pays contractors, consultants or vendors out of the grant funds.

Q: What does it typically cost to have a CA firm manage the BIG grant account and UC filings?
A: Most firms price this as part of a broader Virtual CFO or compliance retainer rather than a standalone per-UC fee, because the grant ledger, bookkeeping and UC preparation are continuous work across the 18-month project rather than a one-time filing. Ask for a retainer scope that explicitly names quarterly UC preparation, no-lien account reconciliation and the annual audited UC as deliverables, rather than a general “compliance support” line item.

Q: How long does the full BIG grant cycle take from application to final reimbursement?
A: The application and selection process, from call closure to agreement signing, typically runs 100 to 135 days. The project itself runs up to 18 months, and the final reimbursement tranche is released only after BIRAC accepts the completion report, which can add several weeks beyond the 18-month project timeline.

Q: What documents does a BIG Partner ask for at each milestone UC?
A: At minimum, the no-lien account statement for the period, the GFR 12-A utilisation certificate with the required certifications, supporting invoices and vouchers for major line items, and the technical progress report covering the same period. Some BIG Partners also request an interim CA certification even where the period does not coincide with the annual statutory audit.

Q: Can BIG grant funds be used to pay a foreign consultant or vendor?
A: The scheme guidelines do not prohibit it outright, but any such payment needs prior BIG Partner concurrence as an outsourced services cost, and the grantee has to separately handle the withholding tax obligation under Section 393(2), Table Sl. No. 17 of the Income-tax Act 2025 (the corresponding provision under the Income-tax Act 1961, applicable for tax years up to FY 2025-26, was Section 195) and any applicable FEMA reporting for the outward remittance.

Q: Can co-founder or promoter salary be drawn from the BIG grant?
A: Only within the manpower budget head, capped at roughly 30% of project cost with a per-head ceiling of ₹50,000 per month, and only for team members formally part of the sanctioned project team. Scientific advisors and mentors named in the proposal cannot draw a salary through the BIG grant.

Q: Does DPIIT startup recognition change how the BIG grant is taxed?
A: DPIIT recognition and the Section 80-IAC tax holiday operate independently of the BIG grant’s own tax treatment. A DPIIT-recognised startup still has to recognise the revenue-head portion of its BIG grant as income under Section 2(49) of the Income-tax Act 2025, though that income can fall within the profit eligible for the Section 80-IAC deduction if the startup otherwise qualifies for the holiday in that tax year.

Q: What happens to unspent grant money if the project is foreclosed early?
A: The unutilised balance in the no-lien account has to be refunded to BIRAC as part of project closure, and this refund is reconciled through the final utilisation certificate for the terminated period. The 5% royalty obligation on future net sales also terminates at foreclosure under the terms of the Grant-in-aid Agreement.

Q: Will an investor’s due diligence team ask about the BIG grant’s royalty liability during a funding round? A: Yes, routinely. The 5% royalty on net sales, capped at the disbursed grant amount, is a contingent liability that should be disclosed in financial statements and flagged in a data room, since it directly affects post-revenue margin and can surface as a diligence finding if it was never disclosed earlier.

Q: Can an individual BIG grantee convert to a company mid-project without disrupting the grant?
A: Yes, this is an explicitly anticipated path under the BIG Scheme Guidelines, provided the new entity meets all company or LLP eligibility criteria, the Project Leader remains the same person and becomes a promoter shareholder, and the no-lien account and reporting obligations transfer cleanly to the new entity with the BIG Partner’s sign-off.

Q: Are NRI founders eligible to apply for or continue on a BIG grant?
A: Only Indian citizens holding an Indian passport are eligible under the scheme, and NRIs qualify as Indian citizens for this purpose. OCI and PIO cardholders are explicitly excluded, which matters for health-tech founding teams with a mixed-citizenship cap table structuring their BIG application around a specific Project Leader.

Q: Is interest earned on the no-lien account taxable to the grantee company?
A: The interest is treated as part of the grant funds for reporting purposes and is typically required to be disclosed and adjusted against the next tranche or refunded at closure, but this does not remove it from the company’s own books as interest income for tax purposes. It should be reported in the UC as project income and separately reflected in the company’s tax computation, since the two treatments serve different purposes.

Regulatory references

• General Financial Rules 2017, Rule 238(1) and Form GFR 12-A (utilisation certificate format)
• Biotechnology Ignition Grant (BIG) Scheme Guidelines, Version 8, July 2020 (BIRAC)
• Income-tax Act 2025, Section 2(49), Section 39(1)(d) and (3), and Section 393(2) Table Sl. No. 17
• Income-tax Act 1961, Section 2(24)(xviii), Explanation 10 to Section 43(1), and Section 195
• Central Goods and Services Tax Act 2017, Sections 7 and 2(31)
• CBIC Circular No. 245/02/2025-GST dated 28 January 2025
• Notification No. 08/2024-Central Tax (Rate) dated 8 October 2024

External sources

• Biotechnology Industry Research Assistance Council (BIRAC)
• Income Tax India
• GST Council / CBIC
• Startup India

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Treelife

Treelife Team | support@treelife.in

We are a legal and finance firm with a deep focus on the startup ecosystem. We offer a wide range of services, including Virtual CFO, Legal Support, Tax & Regulatory, and Global Expansion assistance.

Our goal at Treelife is to provide you with peace of mind and ease in business.