Private sector space players seek govt relief on FDI and GST exemption

Data from the Indian Space Association (ISPA) reveals that, as of November-end 2023, Indian start-ups had attracted $124 million in funding, compared to $120 million in 2022

After India created history through Chandrayaan-3’s soft landing on the moon last year, the booming private sector space industry in the country is pinning hopes on this year’s interim Budget. The sector is upbeat that the Centre will open up foreign direct investment (FDI), introduce a production-linked incentive (PLI) scheme and give goods and services tax (GST) exemption to satellites, launch vehicles and ground equipment manufacturing.

 “There were talks about an FDI into space in India under the automatic route for a while now. Clarity around that would be good. It may be able to match the FDI under automatic route in something like defence. Rolling out FDI, at least 74 per cent, will help the industry,” said Awais Ahmed, co-founder and chief executive officer (CEO), Pixxel, a Bengaluru-based spacetech start-up.

According to data shared by the Indian Space Association (ISpA), till November-end, Indian startups have seen funding to the tune of $124 million, compared to $120 million in 2022. It was hardly $67 million in 2021 and $23 million in 2020.

During the year, India added 54 new startups, taking the total number to 204. This compares to hardly 82 startups in the Indian eco-system in 2020.

Ahmed added that the sector is expecting a PLI scheme for manufacturing. “If we want to build satellites completely indigenously, we must enable manufacturing. Having PLI will see more companies come up and more manufacturing will happen. It will enable more exports,” he added.

Srinath Ravichandran, co-founder and CEO, Agnikul Cosmos, also echoed his words, saying there should be more clarity on FDI.

“Other than that, GST exemption for launch vehicles can be considered. When it was announced, there were no private vehicles in the country. So, you can probably extend that to cover some of the private players,” he added. The demands by ISPA include GST exemption to satellites, launch vehicles and ground equipment manufacturing.

In addition, it is keen on GST exemption on procurement of key inputs. Lower tax rate to 5 per cent on external commercial borrowings (ECBs), given the capital-intensive nature, reducing satellite sector withholding tax from 10 per cent to 2 per cent, given low-profit margins, and PLI for space-grade components on the lines of PLI for drones are among other demands of the association.

“We welcome the government's recent reforms and its groundbreaking initiative to allocate satellite spectrum through an administrative approach. These initiatives undoubtedly have the potential to boost the nascent private space industry in India. To propel this promising industry and drive innovation, it is crucial for the government to develop a comprehensive regulatory framework and address existing fiscal and taxation challenges,” said AK Bhatt, director general of ISpA.