MUMBAI: GST registration cannot be denied to those working from shared office spaces was the response given out to an application sought by a company that was providing co-working space in Kochi. The Authority for Advance Rulings (AAR-GST), Kerala, has taken cognisance of the shift towards a shared office space culture in its recent order.
However, each co-working space should be demarcated with a different desk number.
In some instances, startups have been denied GST registration if they were operating from a co-working space. The main ground for such denial by the registration authorities was that another company has already been registered with the same address.
Advance rulings are binding only on the applicant and the tax officer in respect of that particular transaction for which the ruling was sought. However, it has a persuasive value. Thus, the ruling will strengthen the case of those operating from shared offices. Sunil Gabhawalla, chartered accountant and indirect tax expert said that the advance ruling lays down the correct principles. This ruling will be most helpful if followed consistently by all officials across India.
Typically, startups, in their initial stages, prefer to work from a co-working space. Not only does this mean lower rentals as opposed to hiring an independent office, but co-working spaces also provide various other facilities like high-speed internet, phone & fax numbers, air-conditioning, housekeeping services, pantry with drinking water, administration support and meeting rooms for clients.
A freelance graphic designer who was working from her residence in Mumbai moved to a co-working space as she did not want her residential address to be made public — be it on invoices or otherwise, under various GST norms.
Above all, co-working spaces provide a conducive atmosphere that facilitates sharing of knowledge among entrepreneurs who are its members.
In this case, Spacelance Office Solutions sub-leased co-working spaces to its clients. It provided them the needed infrastructure facilities. Each client was provided a distinct identifiable space, such as tables and chairs.
The clients were engaged in the services sector and did not need to maintain any ‘stock’. However, financial records were maintained by them in electronic form.
The company sought an advance ruling on whether GST registration can be allowed for multiple firms (which were in the services sector) and were operating from the same address, provided they follow all GST rules relating to the principal place of business.
Affirming this, the AAR stated that when applying for GST registration, the startups should upload the rental/lease or sub-lease agreements as proof of address of their principal place of business (which is their respective desk number).
They could also upload a copy of the monthly utility bill towards electricity or water facilities availed by them. The GST number assigned to each co-working space must be displayed at a prominent location, it added.
A real estate expert points out that some co-working spaces offer flexi-seating. They will have to change their model to ensure that a dedicated desk or space is available to each client.
Source: ET Realty
