Budget 2024: Space tech industry urges govt to expand GST exemption to satellites, launch vehicles

ISRO Aditya-L1 Solar Mission

In the upcoming Interim Budget, the space tech industry is urging the government to expand the GST exemption to satellites, launch vehicles and ground equipment manufacturing.

In July 2023, following the 50th meeting of the GST Council, the government granted GST exemption on satellite launch services provided by the Indian Space Research Organisation (ISRO), Antrix Corporation, New Space India Limited, and startups in the space sector.

The Indian Space Association, representing over 39 space tech startups and major companies including Bharti-backed OneWeb, Airtel, and Larsen and Toubro, has requested the government to grant tax holidays and exemptions for firms in the space sector.

The ISpA has also advocated for lowering the tax rate to 5 percent on external commercial borrowings and reducing the withholding tax on the satellite sector from 10 percent to 2 percent. These requests are made in consideration of the relatively low profit margins in the space sector.

The industry body also sought clarity on the FDI policy for space sector and associated aspects. The FDI policy has been long awaited by the space ecosystem, especially private players such as space-tech startups, which in the last couple of years have seen an uptick in investment interest from abroad.

Lt. Gen. A.K. Bhatt (Retd.), Director General of IsPA said, "To propel this promising industry and drive innovation, it is crucial for the government for the development of a comprehensive regulatory framework and address existing fiscal and taxation challenges. We urge the government to consider our recommendations for incentivizing the growth of private space enterprises."

Bengaluru-based space tech startup Digantara's CEO Anirudh Sharma urged for relaxation of custom duties for the space sector in the interim budget.

"Given that India's supply chain is still in its developmental stages, many companies are compelled to import these essentials from global vendors. The space sector demands substantial capital investment, with spacecraft component costs ranging from a few tens to hundreds of thousands of dollars. The imposition of customs duties, which can be as high as 40 per cent, presents a significant challenge for startups operating on tighter budgets," he said.