STRATOSPHERIC ASPIRATIONS: 2024 AERO SPACE PRIVATE SECTOR SEEKS FISCAL HORIZONS IN ANTICIPATION OF A BUDGET BOOST AND REDEMPTION ON GST & FDI

In the cosmic narrative of private-sector endeavors within the Indian space domain, aspirations reach stratospheric heights. Entities in this domain seek governmental respite, with a focus on Foreign Direct Investment (FDI) and Goods and Services Tax (GST) exemption. Recent revelations from the Indian Space Association (ISPA) paint a financial tapestry, indicating that Indian startups secured $124 million in funding as of November-end 2023, surpassing the $120 million mark in 2022.

Following India’s historic lunar soft landing with Chandrayaan-3 last year, the burgeoning private space industry in the nation pins its hopes on the forthcoming interim Budget. The industry anticipates a governmental embrace of FDI, the introduction of a production-linked incentive (PLI) scheme, and the bestowment of GST exemptions for satellite, launch vehicle, and ground equipment manufacturing.

Awais Ahmed, co-founder and CEO of Pixxel, a Bengaluru-based spacetech startup, expressed optimism about the potential FDI influx into the Indian space sector. “Clarity surrounding FDI would be advantageous, possibly matching the FDI under the automatic route in sectors like defense. A rollout of FDI, at a minimum of 74 percent, could significantly benefit the industry,” Ahmed remarked.

As per ISPA’s shared data, Indian startups witnessed an influx of $124 million in funding until November-end, a notable increase from the $120 million in 2022. This surge contrasts starkly with the meager $67 million in 2021 and a mere $23 million in 2020. Notably, the year also witnessed the addition of 54 new startups, bringing the total to 204, a substantial rise from the 82 startups present in the Indian ecosystem in 2020.

Ahmed emphasized the sector’s anticipation of a production-linked incentive (PLI) scheme for manufacturing. “To foster complete indigenization of satellite production, we must bolster manufacturing capabilities. The introduction of PLI would catalyze the emergence of more companies and stimulate increased manufacturing, fostering a conducive environment for exports,” he added.

Srinath Ravichandran, co-founder and CEO of Agnikul Cosmos, echoed Ahmed’s sentiments, emphasizing the need for clarity on FDI policies. Additionally, he proposed GST exemptions for launch vehicles, taking into consideration the absence of private vehicles in the country when the policy was initially announced. The demands put forth by ISPA encompass GST exemptions for satellites, launch vehicles, and ground equipment manufacturing.

Beyond this, the association advocates for GST exemptions on the procurement of key inputs, a reduced tax rate of 5 percent on external commercial borrowings (ECBs) due to the capital-intensive nature of the industry, a reduction in satellite sector withholding tax from 10 percent to 2 percent, considering the narrow profit margins, and the implementation of a PLI for space-grade components, akin to the approach for drones.

AK Bhatt, Director General of ISPA, welcomed recent governmental reforms and initiatives, including the groundbreaking allocation of satellite spectrum through an administrative approach. Despite these positive steps, Bhatt highlighted the need for a comprehensive regulatory framework and the resolution of existing fiscal and taxation challenges to propel the promising private space industry in India forward.

As the private space sector eagerly awaits the government’s stance on FDI, the potential implementation of a PLI scheme, and the consideration of GST exemptions in the upcoming fiscal year’s interim Budget, the narrative unfolds. In this stratospheric journey, these entities seek governmental support to elevate their trajectories, embodying stratospheric aspirations that transcend the cosmos.