ulfilling a key demand of the country’s fledgling spacetech ecosystem, the government has exempted private launch service companies from paying goods and services tax (GST) when they send satellites into space using their launch vehicles or rockets.

“Satellite launch services that are being provided by private organisations shall not be levied GST,” Union Finance Minister Nirmala Sitharaman said after the 50th meeting of the GST Council in New Delhi Tuesday.

Ever since India decided to open up the space sector to private participation through a series of reforms beginning in 2020, the satellite launch segment has become a key focus area for companies looking at driving innovation and seeking new revenue opportunities.

The country’s largest industry association Indian Space Association (ISpA) said that the move fulfilled a recommendation made as part of its pre-Budget proposals to the government for FY24.

“This will definitely incentivise the nation’s space industry and help in its growth. We welcome the government’s initiative and hope this would not only be available to satellite services but to all the other domains of satellite services, including applications,” Lt Gen (Retd) Anil Kumar Bhatt, director general of ISpA, told Business Today.

The SatCom Industry Association (SIA)-India, the country’s leading industry body of satellite communication companies, termed the move as a “morale and confidence booster” for the segment.

“It’s a tremendous development that will help non-government entities become co-travellers in India’s journey into the new space economy. The decision will provide further growth impetus to the private satellite ecosystem in the country,” Anil Prakash, director general SIA-India, told BT.

The past few years have especially witnessed the emergence of several spacetech start-ups such as Skyroot Aerospace, AgniKul Cosmos, Pixxel, Bellatrix Aerospace, Dhruva Space, GalaxEye Space and Digantara Research & Technologies, which have also excited considerable investor interest.

Creating a level playing field

Kondapur (Telangana)-based Skyroot Aerospace said it was a landmark decision that would help in creating a level playing field for all.

“Domestic satellite customers need not pay GST in launching with Indian private companies. Previously this [exemption] was there only with New Space India Ltd (NSIL). It’s heartening to note that it has been extended to private players as well,” said co-founder & CEO Skyroot Aerospace, Pawan Kumar Chandana.

Bengaluru-headquartered Digantara Research & Technologies, which recently raised an additional $10 million in funding, described the move as “transformative”.

“It removes a crucial cost burden and provides private space tech companies with a fair chance to compete on both domestic and international stages. By eliminating this tax barrier, Government has demonstrated its commitment to fostering innovation and growth within the space tech sector,” averred company co-founder & CEO Anirudh Sharma.

Consultancies said the government’s efforts at making the sector competitive would help it grow at a faster pace.

“GST Council’s decision will help in promoting the ‘Make in India’ initiative and ease-of-doing-business. The government accepting the industry’s ask for providing a level playing field to the private sector will go a long way in boosting its growth,” stated Shilpy Chaturvedi, partner at Deloitte India.

Driven primarily by increased private participation, new technologies and the availability of low-cost launch services India’s space launch segment is expected to grow at a CAGR of 13 per cent by 2025, a joint ISpA-EY report last year said.

Most recently, a study by Ireland-based market research and competitive intelligence provider Fact.MR predicted that the satellite communication market would be worth $192.09 billion by 2032 compared with $78.22 billion in 2022.