Union Budget 2025- Key Expectations for the Space Sector, from PLI Expansion to Tax Relief

The space industry in India is eagerly awaiting significant announcements in the upcoming Union Budget 2025, with hopes of receiving a range of measures that will enhance its global competitiveness, support exploration efforts, and promote self-reliance. With ongoing high-profile projects like Chandrayaan-4 and Gaganyaan, the sector is poised for growth. The industry is particularly hopeful for expansions in the Production Linked Incentive (PLI) scheme, tax relief, and increased budget allocations that would fuel further advancements.

Here are some key expectations that the space sector has from the Union Budget:

1. GST Exemptions for Critical Space Components

A major expectation from the space industry is the introduction of a Goods and Services Tax (GST) exemption for essential satellite components, launch vehicles, and ground systems. While satellite launch services have already been exempted, extending this exemption to related components could significantly reduce costs for businesses in the space sector, making their operations more cost-effective.

2. Granting Critical Infrastructure Status

The space sector is hopeful that the government will grant it “critical infrastructure” status, a move that could provide substantial benefits. According to the Indian Space Association (ISpA), such status would allow the industry to access GST rebates, tax incentives, and customs duty relief. Additionally, companies in the space sector would benefit from low-interest loans through financial institutions like IIFCL and NABFID, further easing their financial burden and supporting growth.

3. Customs Duty Relief

There is also anticipation that the government will offer customs duty relief for the import of critical space-related goods and equipment. This would help reduce manufacturing costs for space companies and foster greater global competitiveness. The reduction in customs duties could make India an even more attractive destination for space manufacturing, aligning with the country’s growing ambition to be a leader in space technology.

4. Fiscal Incentives and Tax Exemptions for Space Firms

In terms of fiscal incentives, the space industry is hopeful for measures such as tax exemptions, tax holidays, and accelerated depreciation for companies engaged in space-related activities. The government may also consider introducing a concessional tax rate of around 15% for firms involved in the manufacturing, research, and development (R&D) of space components and those distributing satellite capacity.

5. Streamlined Export Licensing for SCOMET

The space sector also seeks an overhaul of the current export licensing process for Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET). At present, the licensing process is cumbersome, often taking several months, with repeated permissions required. Simplifying this process would make it easier for space companies to export goods, fostering greater global competitiveness.

6. Expansion of PLI Scheme for Space Components

A significant boost could come in the form of an expansion of the PLI scheme to include space-grade components. This would stimulate domestic manufacturing of critical components, reducing dependence on imports and strengthening India’s space supply chain. With a more robust local production base, India could better meet the increasing demand for space technology both domestically and internationally.

7. Reduction in Spectrum Usage Charges

Another crucial area that the space industry hopes to see addressed is the reduction of Spectrum Usage Charges (SUC) for satellite services. These charges, which are applied to the allocation of satellite spectrum, place a financial burden on space companies. A reduction in SUC could help lower operational costs and boost the profitability of satellite service providers. The space sector also anticipates that the government may provide clarity and commitment on long-term satellite spectrum allocation, ensuring stability and growth in satellite services.

8. Support for International Financial Services Centre (IFSC)

The industry also expects the government to extend the benefits of the International Financial Services Centre (IFSC) to companies involved in distributing satellite capacity. IFSC incentives, including regulatory and tax reliefs, would serve to attract foreign direct investment (FDI), foster innovation, and make India a global hub for satellite services. These measures could lead to a significant uptick in investment and development in India’s space sector.

9. Tax Benefits for Satellite Spectrum Fees

In addition to these measures, the space sector hopes for tax relief on spectrum fees, such as a 25% depreciation rate for these fees. Furthermore, recognition of revenue-based license fees as deductible expenses could provide much-needed financial relief for companies in the space industry, promoting growth and sustainability.

Union Budget 2025

The space sector’s expectations from the Union Budget 2025 reflect the industry’s desire for a conducive environment to thrive, enabling India to emerge as a global leader in space exploration and technology. With these proposed measures, the government could significantly bolster the sector, making it more self-reliant, competitive, and capable of contributing to the country’s space ambitions on the global stage.

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