Private space companies want tax holidays and reasonable spectrum usage charge from Budget

India has 55 active space assets which include 18 communication satellites, nine navigation satellites, five scientific satellites, three Meteorological Satellites, and 20 Earth Observation satellites, the survey said

Private space companies have asked the Indian government to impose reasonable Spectrum Usage Charges (SUC) as a percentage of Adjusted Gross Revenue (AGR) for satellite services allocated non-auctioned spectrum under the new Telecommunications Act, 2023. This is to ensure that satellite operators are not burdened with excessive fees.

The Indian Space Association (ISpA) has also proposed allowing a 25 percent depreciation on the one-time license fee for satellite operators and treating the annual license fee as a revenue expenditure. This approach would reduce taxable profits, optimize the tax impact, and support business operations in the satellite sector.

In addition, space companies, represented by the Indian Space Association (ISpA), have requested a tax holiday and GST exemption to enhance the industry's financial stability before the Union Budget 2024.

The ISpA has proposed implementing a comparable scheme for space-grade components, taking cues from the PLI scheme for drones. This step would encourage local manufacturing, strengthen the supply chain for space-related technologies, and attract investments.

Moreover, the ISpA recommended extending the GST exemption beyond satellite launch services to other critical components of satellites, ground systems, and launch vehicles. They argue that this extension would reduce GST input tax credit costs across the supply chain, benefiting the entire sector.

Additionally, as space industrial parks are planned to be developed in various states, non-government entities, including start-ups, plan to make significant greenfield investments.

The ISpA urged the government to introduce tax holidays and exemptions for space sector firms to stimulate growth within the space sector. They also suggested concessions on customs duties for notified imports, which would ease the financial burden on these companies.

Furthermore, the ISpA recommended lowering the tax rate on interest on foreign borrowings to five percent to facilitate more accessible access to necessary foreign funding at cost-effective interest rates for project financing.

They also sought a reduction in the withholding tax from 10 percent to 2 percent on payments made to Indian companies under section 194J of the Income-tax Act, 1961. The ISpA said this measure will help enhance satellite operators' profitability and sustainability.

The ISpA also called for a commitment from the government to procure and adopt space technology solutions across various governance areas such as agriculture, disaster management, infrastructure planning and development monitoring, urban development, and remote area connectivity. This would not only provide a stable market for space tech firms but also enhance the efficiency of public services.

In line with the above, the ISpA said a Digital Public Infrastructure (DPI) and Digital Public Goods (DPG) approach for Earth observation-based geospatial analytics and insights could unlock value and innovation for several stakeholders beyond the space sector.

"With the implementation of these reforms, ISpA expects that enhanced investment and technological advancements will drive innovation, fostering a robust ecosystem for startups and established companies of the space industry,"

Lt. Gen. A.K. Bhatt (Retd.), Director General of the Indian Space Association, emphasized the importance of promptly implementing the Space Activities Act to address legal and standards-related issues and provide a clear regulatory framework for the industry.

"With the recent reforms and initiatives by the government and the guidelines for implementation of Indian Space Policy 2023 from IN-SPACe, the space sector is at a critical juncture towards the journey to becoming a global space power in the coming years," Bhatt added.