The coworking industry has been gaining momentum with rising demand on the back of its cost-effective pricing alternatives and flexible work environment. Notably, major enterprises and corporations have shifted their focus to coworking spaces, aligning with the adoption of the hybrid work model to cater to their organizational needs.
The coworking industry has been gaining momentum with rising demand on the back of its cost-effective pricing alternatives and flexible work environment. Notably, major enterprises and corporations have shifted their focus to coworking spaces, aligning with the adoption of the hybrid work model to cater to their organizational needs.
The commercial real estate sector is witnessing a surge in demand, buoyed by the economic upswing and the gradual return of employees to office spaces. This heightened demand can be attributed to innovative office space concepts, pro-business initiatives, and the provision of high-quality amenities to tenants.
Considering the prevailing trend of hybrid working, the coworking industry harbors certain expectations concerning Goods and Services Tax (GST) and taxation, anticipating favorable measures in the upcoming interim Union Budget that could further propel the growth trajectory of this sector.
Among key measures sought by the coworking industry include lower GST rate for small-scale clients which is expected to help the 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 ₹25,000 could be enhanced to ₹40,000 and timeline from 3 years to 5 years to enable start-ups/coworking entities to enjoy the benefit of Section 80JJAA as these industries are generating a greater volume of employment," said Manas Mehrotra, Founder, 315Work Avenue.
Moreover, the ambiguity regarding GST on the reimbursement of electricity charges could be cleared as utility charges are coworking entities' significant expenditure and GST exemption on such expenditure will contribute to better cash-flow management, he noted.
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Mehrotra further expects the Union Budget to enable coworking firms to claim input tax 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.
"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," according to Mehrotra.
Apart from these, the coworking industry expects lower or concessional rate of TDS and continued extension of tax holiday for start-ups from the upcoming Budget 2024.
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.
"The demand for coworking spaces is expected to grow at around 15-20 per cent over the next two to three years and if the macro fundamentals remain stable, the growth will be higher. Formulating hybrid working rules and policies that balance business goals with workforce needs would be at the top of occupiers' agendas," Mehrotra said.
A significant push to infrastructure and establishment of a single-window clearance system will help in faster establishment of coworking spaces in non-metro cities as well
"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," he added.
The coworking industry in India hopes of favorable tax reforms to fuel its growth amid the rise of hybrid work models. Anticipating lower GST rates, clearer guidelines on electricity charges, and tax incentives from Union Budget 2024-2025, stakeholders envision sustained expansion and a significant contribution to India's evolving commercial real estate landscape.