Union Budget 2024 Spotlights Coworking Sector Concerns

Manas Mehrotra, Founder, 315Work Avenue

The country is seeing a new office culture given the change in work patterns across the world and new preferences of the workforce. Understandably, the coworking industry has become more relevant than ever with the demand surging significantly in the recent times owing to its affordable pricing options and flexible work culture. Large enterprises too have shifted gears to coworking space as they embraced the hybrid work model to suit their organizational requirements. India continues to be the fastest growing flex office market in the APAC region and is set to account for one-fifth of the office market by 2030. Taking into consideration the popularity of hybrid working, we have a few expectations around GST and taxation from the upcoming Union Budget that can further accelerate growth of this sector.

In recent years, the entrepreneurial landscape has undergone a significant change and coworking spaces have emerged as a transformative force in India’s startup ecosystem. Some of the measures that we could look forward to include lower GST rate for small-scale coworking clients. This will significantly help the coworking industry boost their footprints by attracting small start-ups to be part of the industry as well as increase the revenue collection to the government. The salary upper limit of 25k could be enhanced to 40k and timeline from 3 yrs to 5 yrs to enable start-ups/coworking entities to enjoy the benefit of sec 80JJAA as these industries are generating a greater volume of employment. Input tax credit under GST is an important issue that concerns coworking sector. We expect the budget would enable coworking firms to claim input credit on work contract and construction services supplied so that it is passed on to companies who lease out space for coworking and thereby reduce their overall costs.

There are few other aspects that needs attention. Typically stamp and registration duties are high and since both the landlord as well as client agreements are subject to these charges, hence, either concession in such stamp duty rates or allowing twice the duty paid as expenditure under income tax will encourage even the small agreements to get registered. An important requirement for the coworking industry has been Lower/Concessional rate of TDS which will improve the working capital. Another measure that could be announced to intensify growth of the coworking sector is a further and continued extension of tax holiday for start-ups as they would be motivated to scale up their business and enhance investment.

We also believe that a significant push to infrastructure and single-window clearance system will help in faster establishment of coworking spaces in non-metro cities as well. Overall, the coworking sector, is expecting continued improvement in the ease of doing business which will play an important role in the growth of coworking industry in the near future. Going forward, we hope that the government looks at addressing regulatory concerns and encouraging more coworking firms to open-up through a series of both financial and non-financial incentives and ensure faster economic growth. As we move forward, the demand for coworking spaces is only set to witness greater traction from companies across segments.