Co-working business owners and tax professionals have pleaded with the Government to simplify GST registration for companies operating out of shared spaces. In order to stop businesses from exploiting the coworking arrangement just for GST registration, GST authorities requested significant paperwork, such as registered leases and approvals from original owners.
Several global companies looking to start small in India to evaluate the market and surroundings or those looking to adopt a hybrid form of working confront the difficulty of being denied registration at co-working facilities.
GST Registration for the Co-working Owners
Notwithstanding the advantages and flexibility provided by coworking providers, a clear barrier was the refusal of GST registration when the application for the “primary place of business” was made at such shared spaces.
The cautious approach taken by the tax administration stems from worries about growing revenue leakages in cases where illegally obtained GST registrations were used to create fictitious invoices and transfer “paper input tax credits.”
Many landlords won’t grant a NOC to the tenant unless the company’s director is present and the lock-in period is at least one year. This prevents the GST number from being misused.
Participants in the sector should be informed if the authorities are aware of any wrongdoing on the part of particular enterprises so they can be on the lookout. Great caution must be exercised to avoid lumping all enterprises under one umbrella since doing so would impede their urgent need for formalization.
Due to financial constraints, Indian Small & Medium Companies (SMBs) have historically operated from houses or illegal residential zones (Lal-Dora land). For this reason, many enterprises have managed to avoid the attention of the tax authorities.
The primary reasons that a co-working space owner’s request for GST registration is declined are a lack of supporting documents and the field officer’s overly cautious attitude. The coworking space proprietor must comprehend that obtaining a NOC from the property owner is necessary for GST registration.
There have been instances in the past where businesses using coworking spaces have been refused Goods and Services Taxes(GST).
It was predicated on the fact that several offices were using the same location to do business. But today, things are changing, and regulating bodies are embracing and learning more about the coworking environment and how it functions.
The agency has also correctly disputed that registrations obtained at such co-working locations lack stability, given the few records kept at the location and the fixed nature of such addresses.
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Obtaining a joint NOC from the landowner and the owner of the co-working space, with both parties’ signatures, can be a good middle ground. Coworkers have engaged in illicit commercial operations in the past, and the owners have denied any knowledge of this. Hence, it is crucial that property owners assume some responsibility and exercise due diligence before renting out the space to individuals.
An initial owner of a co-working space lends his property to a co-working space developer, who then offers space and other services to several businesses. A single desk or cabinet or the full floor might be obtained as spaces.
According to experts, there is no question that there has been a rise in false invoices and fraud detection, and that these issues need to be managed and prevented. But, the existing method is hurting real taxpayers who are ready to conduct business in India.
With the strict registration requirements in a hybrid workflow model like the one used today, there can come a moment when foreign corporations quit investing in India. The GST Council must move quickly to provide a thoughtful explanation of the GST registration challenges and provide a method to prevent credit fraud without harming legitimate taxpayers for something as basic as registering to pay GST.
