With just a day to go for Budget 2024, flexible office firms are hoping that it will provide benefits to co-working companies such as lower goods and services tax, input tax credit and sops for firms that adopt energy efficient practices.
Budget 2024 will be presented by Finance Minister Nirmala Sitharaman on February 1. Given that this Budget comes ahead of the Lok Sabha elections, it is an Interim Budget or a Vote on Account.
According to Manas Mehrotra, Founder, 315Work Avenue, a co-working firm, some of the measures that flexible office space providers are looking forward from the Budget include lower GST rate for small-scale coworking clients. This will significantly help the co-working industry boost its footprint by attracting small start-ups to be part of the industry as well as increase the revenue collection.
“We also expect that Budget 2024 would enable co-working firms to claim input credit on work contract and construction services supplied so that it is passed on to companies who lease out space and thereby help reduce their overall costs,” he said.
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Typically stamp and registration duties are high and since both the landlord as well as client agreements are subject to these charges, the Budget could consider concession in such stamp duty rates or allow twice the duty paid as expenditure under income tax, he explained.
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“This will encourage even the small agreements to get registered. An important requirement for the co-working industry has been a lower or concessional rate of TDS which will improve the working capital. Another measure that could be announced to intensify growth of the co-working 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,” he added.
Neetish Sarda, co-founder, Smartworks, said that the co-working firms should be recognised as a separate vertical. Budget 2024 should permit flexible workspaces companies to open up commercial spaces in special economic zones.
“We are providing services in a building similar to a real estate builder but are not able to cater to a significant portion of the real estate space, especially SEZs. We can also do a lot on the sustainability front. We should have the option of introducing this aspect into commercial buildings. We should be able to deploy renewable energy and be allowed to buy green credits at scale,” he added.
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Siddharth Verma, Head, BuzzWorks by Brigade Group said that Budget 2024 should consider providing tax incentives directed towards infrastructure improvements such as smart technology and modern amenities. This could also include benefits for co-working spaces that adopt energy efficient practices such as installing renewable energy resources, or energy efficient HVAC and lighting.
As for GST, the current rate of 18% could be lowered for a few years, “as we head towards a more flexible style of working across our cities. This will encourage greater adoption of co-working spaces and enable existing brands that offer this solution to provide even more affordable workspaces wherever possible,” he said.
Flex continues to drive market activity
According to a JLL report, with sustained demand for flexible and managed enterprise services, flex leasing in 2023 is expected to surpass the previous peak achieved in 2022 to close at around 145,000 seats. Nine months of 2023 already saw around 80% of the total seats leased in the full year 2022. In 2024, around 150,000 plus seats are expected to be leased by flex segment.