Rajendra Bhavsar Started The Discussion:
Pl. provide me the information whether there is any supreme court judgement ( pl. provide me the case law details) for deciding the wage component in PF enquiry to be considered as 25% of the bill amount paid to the contractor.
Sir, Thanx for the prompt response.
In PF 7A enquiry, the APFC has asked us (we are the principal employer) to withhold 6.4% of the bill amount paid to the contractor till further orders. He has verbally quoted that there is a supreme court judgement that in case of absence of any wage record 25% of the total bill paid to the contractor shall be treated as labour component. Therefore i am interested in knowing whether there is any supreme court judgement. Pl. provide me the details if any such judgement is really there.
on PF i donot know but on ESi this judgement is there .
being a principle employer you are responsible for the same.
but what type of contract it was .whether this work was done inside on contract basis or outside the premises.
j s malik
I agree that in absence of details of material cost and labour cost in a particular bill (of a contractor), it will be construed as 25% as labour charge and the balance is material cost. This is pertaining to ESI alone.
Whereas there is no such system availble in PF.
You must understand one big difference between these two acts.
1) ESI is an insurance agency (remember Employees State INSURANCE Corporation) where they do not have to see from whom they are collecting the money. It is collected from you and spent to those who are in need. Therefore it is payable.
2) To avail the PF benefits one has to have the names of the beneficieres. The contractors employ their casual labours. They work for two days with him and vanish. He hires other labour again; he works for 10-15 days and goes elsewhere (Remember you need to submit Form-2 to enrol them as members; by the time you organize this, they are not there!).
If you deduct PF contribution from the contractor's bill, the amount collected or paid as PF contribution, has to necessarily to be paid back at a later date to the beneficiary for whom they collected. In our case, it is not possible to keep record of such employees.
Hence PF office does not and will not demand PF contribution from such bills.
Hope we are clear now!
Principal Employer, when employing contract labours (through contractors), is required to ensure that the contract labours deployed for his work are paid minimum wages, and statutory deductions are made and deposited with the respective authorities so that these contract labours get their due benefits under these two social security acts. Hence, identification of contract labour is all the more necessary for ensuring benefits to them. Principal employer is thus required to keep track of all the benefits arising, to those contract employees, out of the job entrusted to the contractors employing those contrac labours. So, in absence of any such details available to the statutory bodies for identification of labour element, they take a thumb rule of 25% on the invoice value as labour charges which have been corroborated through different case laws. However, for labour intensive jobs, this rate may vary in higher proportion.
For any further query, you may get in touch with me on .
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