Start-up announcements will benefit coworking sector
New Delhi, February 01, 2020: Considering the popularity of co-working, we had some expectations from the Budget 2020 to further propel the growth in the sector. The Union Budget 2020-21 has announced a few measures that would benefit the start-up industry and indirectly the coworking sector. The budget has proposed deferring the tax payments on ESOPs by five years or till the employees leave the company or sell their shares, whichever is the earliest. This will reduce the cash flow problem for employees who do not sell their shares immediately and continue to hold them for a long term. The budget has also proposed a 100% deduction of profits for three consecutive assessment years out of seven for eligible start-ups having turnover of up to Rs 25 crore and an increase in the turnover limit for tax exemption for start-ups from Rs 25 crore to Rs 100 crore, all of which will boost the start-up sector.
There are a few other measures that would benefit the coworking industry. The Investment Clearance Cell will give a boost to start-ups as there would be quicker and easier approval for setting up of start-ups. Exclusive funding, single window clearance and portal for start-ups would also encourage entrepreneurs to take greater risks to set up start-ups. This will augment the number of start-ups in the country and we could be heading to be the largest start-up ecosystem in the world. This will in turn impact the coworking sector positively as there would be greater demand for coworking spaces.
However, there are a few aspects that the budget could have addressed. There was a need to reduce GST to the lowest slab for upcoming innovative startups as it impacts their budget. Introduction of a new provision under the Income Tax law to reduce the rate of TDS as against the present rate of TDS at 10%, u/s 194I which is applicable on the conventional renting business, would have helped the co-working firms to improve its quick ratio and consequently, the co-working firms’ financial shape would have become attractive from its cash flow perspective.
Co-working culture, at present, is experiencing high growth trajectory in India. Going forward, 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.
Corporate Comm India (CCI Newswire)
