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Budget 2021: GST, Rate of TDS On Coworking Spaces Must Be Reduced

Budget 2021: Currently, coworking spaces charge a GST of 18 per cent to all clients
Budget 2021: Currently, coworking spaces charge a GST of 18 per cent to all clients

Budget 2021: Coworking office spaces have witnessed tremendous growth in the last few years, however, presently, the rate of TDS applicable on coworking services is 10 per cent as coworking companies provide renting of both movables and immovables. The rate of TDS needs to be reduced as it will eventually provide real estate solutions to clients at economical rates, further helping in better flow of working capital, said Mr. Manas Mehrotra, Founder, 315Work Avenue, a coworking firm. He added that there is also a need to reduce the goods and services tax (GST) charged to clients of coworking spaces. Currently, coworking spaces charge a GST of 18 per cent to all clients, which causes an impact on startups.

There is a need to reduce the GST to the lowest slab for the upcoming startups as it will significantly impact their respective budgets. Apart from GST, the government should enable co-working firms to claim input credits on work contracts and construction services supplied as detailed under GST provisions. This would check the increased outflow of cash coworking firms are currently experiencing. The input tax credit under GST could also be extended to developers so that it could be passed on to companies who lease out space.

The institutional capital is crucial to coworking spaces which are dependent on funds for multiple factors. Mr Mehrotra explained that the government must also allow banks to give loans to coworking firms against the cash flow of coworking players. Also, to increase funding in coworking sector, the government should provide investment benefits to investors of these coworking spaces. Further, in order to expand from the metro cities to the tier II and tier III markets, the sector is also anticipating an added infrastructural push from the government, and a single-window clearance system would help quicker setting up of coworking spaces.  

The government should recognise coworking spaces under special schemes like real estate investment trust (REIT) and provide tax benefits to handhold the industry for better growth. As several entrepreneurs who opt for coworking solutions are early and mid-startups, the government could look at reducing the present rate of registration charges and stamp duty to register documents at registrar offices as high rates additionally burden them. This will provide a stimulus to both start-ups and coworking spaces.