EPFO Circular on Inspections Conducted Basis Supreme Court Order: Big Step to Curb Harassment

Central EPFO has issued a circular on 28.08.2019 stating  further clarifications and adjudication to curb harassment and probable corruption on the wake of honorable Supreme Court’s Judgement.

The honorable Supreme Court, in it’s judgement on 28.02.2019 had clarified the definition of basic salary to calculate provident fund contribution (EPF). On the basis of the said judgement, various EPFO regional offices issued inspection orders to big companies in order to impose liability of EPF contribution for past 2-3-4 years period as per the definition confirmed by the court.

Big Step Against Harassment

Various representations had be given by different industry associations to the government seeking protection from such unreasonable financial burden in tough times.

Being a serious issue, this has been taken care of by the government. The EPFO circular has come as a big sigh of relief for the industry. Circular says that the Central EPFO had noticed that several field offices are issuing notice to the employers for the inspection of the wage structure for last two-five years to find out if any allowance which was a part of gross salary was omitted by the organisation.

The department in it’s circular said that if any notices are issued on the basis of supreme court judgement and without any prima facie evidence of arbitrary bifurcation of wages with an intention to avoid EPF liability will not be pursued further and such officers will be liable for further administrative actions.

However, there will be investigations carried out after taking permission from CAIU for the notices issued with proper supporting evidence that the employer has illegally practiced avoidance of EPF liability by splitting basic wages.

This seems to be a good investor friendly effort from the government as the EPF scheme is not a tax revenue scheme. Unreasonable burden of backdated contributions would have forced many units to shut or cut their operations.