India Space Startups Demand Budget Action: Early Orders, Tax Clarity Key

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AuthorIshaan Verma|Published at:
India Space Startups Demand Budget Action: Early Orders, Tax Clarity Key
Overview

India's burgeoning space startup sector is urging the government to prioritize early customer commitments and tax reforms in the upcoming Union Budget 2026. Founders highlight that consistent government procurement and simplified tax structures, including dedicated HSN/SAC codes, are critical for scaling domestic space hardware manufacturing and achieving global competitiveness.

Early Government Demand Crucial for Scaling

India's fast-growing space startup sector is calling for simpler regulations and firm purchase commitments from government agencies ahead of the Union Budget 2026. Founders emphasize that early government buyers are essential for scaling private space firms, transforming nascent technology into viable businesses.

Despite recent improvements in official support, high development costs and the scarcity of early government customers continue to impede the growth of space hardware manufacturing in India. Digantara's CEO Anirudh Sharma stated that private companies require customers more than grants or investments. The current procurement system predominantly favors mature technologies, forcing startups to self-fund risky development stages.

Sharma pointed to international models where governments commit to purchasing evolving technologies. Without such mechanisms, India risks a reactive approach to space capability development rather than building long-term national assets. This proactive strategy is seen as vital for sustained growth and global competitiveness.

Tax and Classification Reforms for Viability

Beyond demand-side support, industry players are advocating for targeted tax and classification reforms to enhance economic viability. Dhruva Space's Keyur Gandhi called for the introduction of dedicated Harmonized System of Nomenclature (HSN) and Service Accounting Code (SAC) codes for space-grade components and services. These codes are crucial for the Goods and Services Tax (GST) system, determining applicable tax rates and compliance requirements.

Implementing specific HSN/SAC codes would simplify GST burdens, unlock input tax credits, and clarify domestic value addition rules. Gandhi also proposed extending Special Economic Zone (SEZ)-equivalent indirect tax benefits to authorized space-tech manufacturers. These targeted reforms aim to reduce costs, unlock working capital, and attract both private and foreign investment, thereby making Indian space companies globally competitive. The industry's budget expectations are converging on creating early demand and easing tax and regulatory frictions.

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