On Monday, the labour ministry notified the rate cut in PF contribution to 10% which as per current regime is 12% for both employer and employee. The move will increase the take home pay of 4.3 crore EPF subscribers and provide relief to 6.5 lakh companies.
As part of the Covid 19 relief package worth Rs. 20 lakh crore, Finance Minister Nirmala Sitharaman in the previous week announced a rate cut in PF contribution for three months beginning May. The move is said to extend liquidity infusion to the tune of Rs.6750 crore into the system.
All the establishments covered under the EPFO including the exempted ones will be part of this ruling. However, the PF rate cut shall not be applicable to central public sector enterprises (CPSEs) and state public sector units for whom the employer is the government and they would continue to contribute 12% to employee's EPF account.
Also, establishments that form the part of the previously announced Rs 1.7 lakh crore Pradhan Mantri Garib Kalyan Yojana will not be part of the above notification.
"In exercise of powers conferred by first proviso to section 6 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), the central government, after making aforesaid inquiry, hereby makes the following amendments in the said notification number S.O. 320 (E) dated the 9th April, 1997," labour ministry said in its notification dated May 18.
"Whereas due to Covid-19 pandemic, lockdown is in force across the country and the central government after making necessary inquiry is satisfied that to provide liquidity in the hands of employers and employees, there arises a need to amend the notification of the government of India in the Ministry of Labour, dated 9th April, 1997," it added.
As the move has been announced for a limited time period i.e. for 3 months and is seen as a liquidity enhancing move with no direct implication on government finances, experts want the measure to be extended up to March 2021.