Looking for expert help with GST and income tax for coworking space operators India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- Coworking desks, private cabins and meeting rooms are taxed at 18% GST: renting of non-residential property, SAC 997212, Notification 11/2017-Central Tax (Rate) S. No. 16.
- If your landlord isn't registered under GST, you pay 18% on the building rent yourself under reverse charge (Notification 13/2017-Central Tax (Rate) S. No. 5AB, from 10 October 2024) and claim it back as credit. Composition operators are outside this since 16 January 2025.
- Electricity bundled with a seat is taxed at 18% even on a separate line, unless you pass it on at actuals as a pure agent (CBIC Circular 206/18/2023-GST).
- Company members usually deduct 10% TDS on your fee once it crosses Rs 50,000 a month. From 1 April 2026 that's Section 393(1) of the Income-tax Act 2025.
- You also deduct TDS on the rent you pay your landlord if you're a firm, company or a proprietor with last year's turnover above Rs 1 crore.
What is the GST rate on coworking space in India? Coworking desks, cabins and meeting rooms are taxed at 18% GST: 9% CGST plus 9% SGST of the state where the centre is. They fall under real estate services, heading 9972 (SAC 997212, renting of non-residential property), at serial number 16 of Notification 11/2017-Central Tax (Rate). Rent from an unregistered landlord attracts 18% reverse charge.
A coworking business has tax on both sides of the lease. You pay rent for a floor, often to an individual landlord. Then you license desks and cabins to startups, freelancers and company teams, and each of them may deduct TDS from your fee. The margin sits between those two flows, so a missed reverse charge entry or a TDS mismatch eats into it fast. This guide covers GST as it stands after the September 2025 rate changes, and income tax for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, with the matching sections of the Income-tax Act 2025 that apply from 1 April 2026.
What GST do you charge your members?
18% on almost everything you sell from the floor. Serial number 16 of Notification 11/2017-Central Tax (Rate) taxes real estate services under heading 9972 at 9% central tax, and CBIC's Explanatory Notes put "rental or leasing services concerning industrial, commercial or other non-residential buildings", including office buildings, under SAC 997212. Notification 15/2025-Central Tax (Rate), the services amendment effective 22 September 2025, did not change serial number 16, and the 2026 rate notifications don't touch it either.
Comparison
GST on What a Coworking Centre Bills
| What you bill | GST | Why | Source |
|---|---|---|---|
| Hot desk, dedicated desk or private cabin, monthly licence | 18% | Renting of non-residential property, SAC 997212 | Notif 11/2017-CT(R), S. No. 16; CBIC Explanatory Notes |
| Meeting room or conference room by the hour or day | 18% | Same renting service, shorter period | Notif 11/2017-CT(R), S. No. 16 |
| Electricity bundled with the seat or cabin, even on a separate line | 18% | Ancillary to renting, so part of a composite supply | CBIC Circular 206/18/2023-GST, para 3.2 |
| Electricity recovered at exactly the board's charge, as pure agent | Not part of your value | Pure agent recovery at actuals | CBIC Circular 206/18/2023-GST, para 3.3 |
| Client registered in another state, desks in your centre | CGST + SGST of your centre's state | Place of supply is where the property is | IGST Act s.12(3)(a) |
Source: Notification 11/2017-Central Tax (Rate) as amended; CBIC Circular 206/18/2023-GST; IGST Act Section 12(3); CBIC Explanatory Notes to the Scheme of Classification of Services
Two of those rows trip up new operators. The electricity one first: CBIC said in Circular 206/18/2023-GST that electricity supplied along with renting "forms a part of composite supply", and "even if electricity is billed separately" the renting rate applies. So a line saying "Electricity: Rs 2,000" on a cabin invoice still carries 18%. Only when you charge members the same amount the DISCOM charged you are you treated as a pure agent, and then it stays out of your taxable value.
The second is place of supply. Section 12(3)(a) of the IGST Act fixes the place of supply for services "directly in relation to an immovable property", including "grant of rights to use immovable property", at the property's location. A Pune company taking eight desks in your Hyderabad centre gets a Telangana CGST and SGST invoice, never IGST. If you open a second centre in another state, that centre needs its own GST registration there.
Reverse charge on your building rent
This is the entry most coworking operators miss. From 10 October 2024, Notification 09/2024-Central Tax (Rate) inserted serial number 5AB into Notification 13/2017-Central Tax (Rate): "renting of any property other than residential dwelling" by "any unregistered person" to "any registered person" is taxed under reverse charge. So if your landlord is an individual who isn't registered under GST, you pay the 18% on the rent, not them.
Worked example. You lease a 7,000 sq ft floor in Madhapur from an unregistered individual at Rs 3,50,000 a month. Under 5AB you pay GST of Rs 63,000 (Rs 31,500 CGST and Rs 31,500 SGST) through GSTR-3B, in cash, because the credit ledger can only pay "output tax", and Section 2(82) of the CGST Act excludes reverse charge tax from that term (Section 49(4)). You then claim the same Rs 63,000 as input tax credit, which you use against the 18% you charge members. The net cost is close to zero if you report it correctly. Miss it, and you have unpaid tax plus interest on a large monthly figure.
Notification 07/2025-Central Tax (Rate), dated 16 January 2025, added the words "other than a person who has opted to pay tax under composition levy" to the recipient column. So a composition operator doesn't pay this reverse charge. If your landlord is registered, none of this applies: they charge 18% on their invoice and you claim it as credit.
The same entry works the other way round. A small operator who isn't registered and licenses cabins to a GST-registered company puts the reverse charge on that company. Expect corporate members to ask you to register for that reason.
Step-by-Step Guide
GST Checks Before You Sign a New Floor Lease
1. Is the landlord registered under GST?
Registered: they charge 18% on the rent and you claim it as credit. Not registered: go to step 2.
2. Are you a regular GST taxpayer?
Yes: you pay 18% reverse charge on the rent under Notification 13/2017-CT(R) S. No. 5AB. Composition: no reverse charge on this rent since 16 January 2025 (Notification 07/2025-CT(R)).
3. Pay and claim in the same return
Report the rent as an inward supply liable to reverse charge in GSTR-3B, pay the tax in cash and take the input tax credit.
4. Plan the fit-out credit
Partitions, flooring and false ceilings capitalised to the building are blocked under CGST Act s.17(5)(c) and (d). Budget the fit-out cost including GST.
5. Set up TDS on the rent
If you are a firm, company or a proprietor whose turnover crossed Rs 1 crore last year, deduct 10% TDS on building rent above Rs 50,000 a month.
Source: Notifications 13/2017, 09/2024 and 07/2025-Central Tax (Rate); CGST Act Section 17(5); Income-tax Act 2025 Section 393(1) Table Sl. No. 2
Our GST on rent guide covers the landlord's side of the same rules.
Registration, composition and fit-out credit
You must register once aggregate turnover crosses Rs 20 lakh in a financial year (Rs 10 lakh in special category states), under Section 22(1) of the CGST Act. The higher Rs 40 lakh limit in that section is only for suppliers dealing exclusively in goods, so it never applies to a coworking space.
Composition for service providers is 3% CGST plus 3% SGST under Notification 2/2019-Central Tax (Rate), for suppliers whose aggregate turnover last year was Rs 50 lakh or less and who make no inter-State supply. Condition 3 is the catch: you "shall not collect any tax from the recipient" and get no input tax credit. Startups and company teams claim credit on the 18%, so most of them prefer a member that issues a tax invoice. Composition fits only a small centre whose members are mainly freelancers and unregistered businesses. Our composition scheme guide sets out the eligibility tests.
Fit-out is the other big number. Section 17(5)(d) of the CGST Act blocks credit on goods or services received "for construction of an immovable property (other than plant and machinery) on his own account", and Explanation 1 says construction includes "re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation". Built-in partitions, flooring and false ceilings you capitalise to the leased premises usually fall here. Credit on rent, electricity, internet, housekeeping and similar running costs isn't affected by this block.
Once aggregate turnover crosses Rs 5 crore, you also have to issue e-invoices for B2B members (Notification 10/2023-Central Tax). Our GST registration service handles a new centre's registration, and the GST return filing service files GSTR-1 and GSTR-3B with the reverse charge entry every month.
What TDS will your members deduct?
Most company members treat your seat fee as rent for the use of a building and furniture, and deduct 10% once the payment crosses Rs 50,000 for a month or part of a month.
For FY 2025-26 this was Section 194-I of the Income-tax Act 1961, as amended by Finance Act 2025 to the Rs 50,000 monthly threshold. From 1 April 2026 it is Section 393(1) of the Income-tax Act 2025. "Rent" in Section 402(29) means any payment "under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of" land, building, furniture or fittings, among other items, which is how a desk licence usually gets read. Who deducts, and at what rate, depends on the member:
Comparison
TDS on Rent from FY 2026-27 (Income-tax Act 2025, Section 393(1))
| Payer | Table entry | Rate | Threshold |
|---|---|---|---|
| Company, firm, LLP, or individual/HUF with business turnover above Rs 1 crore (profession above Rs 50 lakh) last year | Sl. No. 2(ii)(b) | 10% (land, building, furniture, fittings) | Rs 50,000 for a month or part of a month |
| Same payers, for machinery, plant or equipment only | Sl. No. 2(ii)(a) | 2% | Rs 50,000 for a month or part of a month |
| Individual or HUF who is not a specified person | Sl. No. 2(i) | 2%, deducted for the last month of the year or tenancy | Rs 50,000 for a month or part of a month |
Source: Income-tax Act 2025, Section 393(1) Table Sl. No. 2 and Note 1; Section 402(29) and 402(37), as amended by Finance Act 2026
Worked example. A software company takes 10 dedicated desks at Rs 6,000 each for November 2026. Your fee is Rs 60,000 and GST at 18% is Rs 10,800 (Rs 5,400 CGST and Rs 5,400 SGST), so the invoice is Rs 70,800. The fee crosses Rs 50,000 for the month and the company is a specified person, so it deducts 10% of Rs 60,000: Rs 6,000. Over a year that's Rs 72,000 of TDS credit. It reaches your return only if the company files its TDS statement with your PAN, so check Form 26AS and AIS every quarter.
Some members deduct under the contract or professional fee entries instead, especially where the agreement bundles services. Whatever section they pick, the credit is yours if it appears against your PAN. Our TDS on rent guide has the full threshold history.
TDS on the rent you pay your landlord
You're a payer too. A firm, LLP or company deducts 10% on building rent above Rs 50,000 a month under Sl. No. 2(ii)(b). A proprietor deducts at 10% only if last year's business turnover exceeded Rs 1 crore, which makes them a "specified person" under Section 402(37). Below that, the 2% entry in Sl. No. 2(i) applies, deducted once for the last month of the tax year or of the tenancy. On the Rs 3,50,000 floor rent in the earlier example, a company operator deducts Rs 35,000 every month and files the quarterly TDS statement. The TDS filing service runs both sides: what you deduct and what your members deduct from you.
Income tax: which head, and is 44AD worth it?
If you lease the building and license it out, your income is business income. Section 20(1) of the 2025 Act taxes as house property only the annual value of a building "owned by the assessee", and an operator on a lease doesn't own the floor. If you run the centre in a building you own, the answer depends on how much of what you sell is service rather than space, so get advice on your own facts. Our commercial property rental tax guide covers the owner-landlord side.
Section 44AD of the 1961 Act, now Section 58 of the 2025 Act from tax year 2026-27, lets a resident individual, HUF or partnership firm (not an LLP) declare 6% of turnover received by bank or digital mode and 8% of the rest as profit. The turnover limit is Rs 2 crore, or Rs 3 crore where cash receipts are no more than 5% of the total. Take a centre with Rs 1.2 crore of receipts, all by bank transfer: deemed profit is Rs 7,20,000. Rent, electricity, staff and fit-out depreciation can leave a new centre with a much thinner margin, or a loss, in its first year. 44AD would still tax you on Rs 7,20,000. Most first-year operators are better off with proper accounting and bookkeeping and an ITR on real numbers.
Common mistakes coworking operators make
- Skipping reverse charge on an unregistered landlord's rent. It's the largest single GST entry in the business. The credit offsets it, but only if you pay and report it.
- Leaving electricity out of the taxable value. A separate electricity line on a member invoice is still taxed at 18% unless you recover it at actuals as a pure agent.
- Charging IGST to out-of-state companies. The place of supply is your centre's state, so the invoice carries CGST and SGST.
- Claiming credit on capitalised fit-out. Built-in partitions and flooring are blocked under Section 17(5). Price the fit-out with GST as a cost.
- Ignoring TDS mismatches. Large members often deduct under the wrong section or quote the wrong PAN. Reconcile AIS every quarter, not in July.
How Tax Garden helps coworking operators
We set up GST registration for each centre, post the landlord reverse charge entry and file your GST returns every month. We also file TDS statements on the rent you pay and match the TDS your members deduct against Form 26AS. At year end we check 44AD against your actual books and file the return that fits. If you also employ front-desk and housekeeping staff, our housekeeping contractors guide covers the payroll side of facility work.
