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The government should lower GST to encourage Co-working sector

The government should lower GST to encourage Co-working sector

Mr Manas Mehrotra, Chairman, 315 Work Avenue

by Manas Mehrotra,

Co-working spaces have now become the buzz word in India’s commercial realty segment due to the voluminous demand for shared working spaces in the recent past. While the demand for coworking spaces continues to rapidly across India, there are some key changes that co-working firms are expecting around GST and taxation in the upcoming Budget. Input tax credit under GST is an important issue that concerns the sector. The companies are expecting that the government would enable co-working firms to claim input credits on work contract and construction services supplied, as detailed under GST provisions. This would check the increased outflow of cash that co-working firms are currently experiencing. The firms are hoping that input tax credit under GST be extended to developers so that it is passed on to companies who lease out space and thereby reduce their overall costs. This would significantly aid the faster growth of co-working business in the country.

Co-working has become a thriving ground for start-ups and is encouraging its growth within its ecosystem. To make this growth upbeat and continuous, co-work firms are looking forward to developments in the government’s smart cities initiative, as companies are looking for improvement in infrastructure to expand in metros and make a move into Tier II and Tier III cities too.

Co-working firms are also expecting that the government would curb or altogether eliminate angel tax this Union budget as it would enable the firms to lease more spaces for start-ups, enterprises, MSMEs and entrepreneurs. Angel tax, many believed would destroy the start-up edifice and indirectly co-working firms would desist from leasing co-work spaces. Angel funding is now being considered as income and is being taxed at the full income tax rate of 30 per cent. This will detract higher investment in co-working spaces.

Co-work firms are also hoping that bank funding for start-ups is enhanced from Rs 25 lakh to Rs 1 crore to make available greater access to financial resources to start-ups. Also considering that startups do not earn the profit in their initial business years, we expect that the government can lower the income tax slabs for startup employees which will aid startups to reduce costs. Hence, we look ahead to some important tax exemptions that would give an enhancement to all existing and upcoming startups and which would increase demand for co-working spaces.

In conclusion, co-working spaces are experiencing a high growth trajectory in India. These spaces have the power to improve a city in multiple ways, from stimulating further economic growth to nurturing a more supportive community of professionals. We are expecting that the government would introduce policies in the budget that would be favourable to them in the areas of de-regulation, taxation and input tax credit. The firms are looking to lease a greater amount of space as the current demand is high. An important concern is the need to cut through paperwork as the ease of doing business will determine the growth rate of co-working firms in India over the next few years.  Coworking has been a game-changer and because of its nature and flexibility, it will continue to thrive.

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