28.12.2022: Private satcoms seek GST, other tax benefits to boost competitiveness, affordability

Satellite operators plan to push the government to exempt private satellite launch service providers from the 18% goods and services tax (GST) to create a level-playing field with state-owned players, boost their overall competitiveness and make satellite broadband services more affordable in India.

As part of their recommendations for Budget FY24, satcom players will also likely seek an extension of tax benefits via deduction of licence fees and spectrum usage charges (SUC) under Sections 35ABA and 35ABB of the Income Tax Act, 1961, that are currently available only to telcos but not satellite operators.
The Indian Space Association (ISpA), a grouping of space and satellite players such as Bharti-backed OneWeb, Airtel, Hughes Communications, Tata-backed Nelco and L&T amongst others, is also putting together a comprehensive list of satellite electronics and hardware to qualify for sops under the Centre’s production-linked incentive (PLI) scheme, and in turn, boost their local production.
Separately, ISpA will seek deemed special economic zone (SEZ) status for space tech parks/existing manufacturing setups to further ramp up domestic production of satellite services equipment.
“At present, only state-owned satellite launch companies such as NewSpace India (NSIL) — the commercial arm of ISRO — are exempt from GST…we will urge the government to also exempt private satellite launch service providers, which will not only boost their financials but also make high-speed satellite internet services more affordable in India,” Lt. Gen. Anil Bhatt, director-general of ISpA told ET.

The budget proposals are aimed to further boost India’s space economy that is estimated to be worth around $13 billion by 2025. Competition has intensified in the country’s relatively nascent satellite broadband services turf with OneWeb, Tata-backed Nelco, Reliance Jio and Elon Musk’s Starlinklooking to launch satellite internet services. OneWeb and Jio have already received GMPCS (global mobile personal communications by satellite services) permits while Starlink has applied for one.

ISpA’s budget recommendations are likely to be submitted to the finance ministry later this week.

The budget proposals will also call for input tax credit (ITC) eligibility for services associated with mergers and acquisitions ((M&A) in the satellite services space. At present, input tax credit is not available for goods and services relating to business transfers such as consultation & legal services, due-diligence services amongst others.

M&A activity has increased as companies look to synergise in a dynamic economic environment, and we will recommend necessary amendments for eligibility of ITC,” said ISpA’s Bhatt.

Input tax credit is a mechanism to avoid cascading of taxes or a `tax on tax’

Among other budget proposals, satellite companies will also push the government for rationalisation of tax deduction at source (TDS) provisions on payments across the entire value chain to reduce the overall impact to 2% from 10% now to boost liquidity levels, and in turn, price satcom services more affordably.
Source: The Economic Times

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