Budget 2020: Reforms to incentivize co-working sector

By Manas Mehrotra,

The demand for co-working office spaces has seen tremendous growth in the last few years and is expected to further witness a spike in the near future. The easy environment along with affordability and flexibility in pricing options has attracted large enterprises and start-ups alike towards the co-working culture. Considering the popularity of co-working, the demand for the sector is expected to see a sharp rise in 2020 and beyond. However, we have some important expectations from the upcoming Budget 2020 to further propel the growth in the sector.

The government must provide more assistance to startups to be able to grow and provide tax benefit to Angels for investing in them. There is also need to reduce GST to the lowest slab for upcoming innovative startups as it impacts their budget. Apart from these, input tax credit under GST is an important issue that concerns the sector. The government has not enabled co-working firms to claim input credits on work contract and construction services supplied, as detailed under GST provisions. This would have checked the increased outflow of cash that co-working firms are currently experiencing. Co-working firms are also hoping that input tax credit under GST be extended to developers so that it could be passed on to companies who lease out space and thereby reduce their overall costs.

To enable more start-ups to opt for co-working spaces, an increase in the bank funding amount to them would be welcome. There is also a robust demand to lower the income tax slab for the employees of start-ups. Also, keeping in mind the minimal profits that they earn during the initial years of inception, increase in bank funding is expected to meet the financial crisis faced by the firms during these years. Income tax should allow the co-working space users to make a lower rate of TDS as the present rate of TDS is 10%, which impacts badly on the quick ratio of the co-working firms and hence, the co-working firms' financial shape has become less attractive from a cash flow perspective.

Co-working culture, at present, is experiencing high growth trajectory in India. A single window approval approach is also required by coworking, instead of having to seek multiple approvals for the same business. Further, in order to expand from the metro cities to the tier II and tier III markets, added infrastructural push in these markets from the government would be appropriate. Overall, the co-working industry is looking at improvement in the ease of doing business. The government could assist in this a great deal by addressing regulatory concerns and by encouraging more coworking firms to open up through a series of both financial and non-financial incentives.

(Manas Mehrotra is the Chairman of 315Work Avenue, a leading co-working space provider)