For space tech startups, e-commerce imports still come with a heavy tax bill

Industry and startups warn that outdated import rules for online procurement are quietly raising costs for India’s spacetech ecosystem.

• Space tech firms can't get import duty exemptions through global e-commerce platforms.
• Procedural changes needed to extend duty exemptions to online procurement
• Startups face higher costs, slower prototyping without e-commerce exemptions

Did our AI summary help?

The government may have lowered import duties on space and satellite components in the last year's Budget but the Indian space tech industry says it can't avail these benefits when procuring parts through global e-commerce platforms

Platforms such as Digi-Key, Mouser Electronics, RS Components, Newark, Amazon Business and Alibaba are the fastest and most commonly used route for specialised hardware.

"The government in its budget had announced reduction of import duty on space products and satellite components from 30 to 25 percent to zero percentage," Indian Space Association (ISpA) director general Lt Gen AK Bhatt (retd) told Moneycontrol.

"The same could only be availed after taking approval from the ISRO HQ who verified the above usage." However, he added, "this forward-looking positive step of the government cannot be availed while using an e-commerce platform for procurement."

Extending exemptions to online procurement requires procedural changes and not a policy rollback, he said.

"In order to ensure that custom exemptions authorised by the government are availed for e-commerce, provisions need to be made for this," he said, suggesting mechanisms such as pre-procurement approvals or post-procurement refund claims. "This will save costs from 30 to 5 percent. A huge cost saving."

For space tech startups, much of the equipment used by them are routinely sourced from e-commerce platforms.

"When we go the e-commerce route, we're typically talking about an extra 25 percent in total costs upfront," said Achintya Tewari, lead for business development at Piersight Space. "You've got customs duty that can range from 5 to 20 percent, then another 18 percent GST on top," he added.

While GST can be claimed back later, most spacetech startups are still in the build phase, he said. “So that's basically a working capital hit that can slow things down compared to the exemption route.”

The impact is not limited to balance sheets. "The absence of tax exemptions for e-commerce imports makes speed a business call," Tewari said.

"It makes the procurement department think about faster delivery equals extra cost, and that slows down prototyping if the speed isn't worth the 25 percent extra cash burn."

Rather than classifying individual components, he argued for a company-level approach. “If I am an approved space tech company, then my imports should be exempted,” he said.