ESIC Contribution for "New Area" as per 2019 Amendment - Will these areas attract reduced contribution rates?

Hello Everyone,

I have a query regarding ESI Contribution rates. According to the 2019 notification, ESI Contribution rates were reduced to 4% (3.25 for Employer & 0.75 for Worker). The notification amended a specific section 51 of the ESIC Act.

My query pertains to one of our establishments being notified as a "New Area" under ESIC in January 2019 and another being notified as "New Area" in Aug 2020. Will these areas attract the reduced contribution rates of (3.25 & 0.75) or continue to attract the existing rates (3 & 1) as per the 2016 ESIC Notification? Please help.

Dear Prakhar Pandey,

ESIC contribution rate for the newly implemented area of 1% employees' share and 3% employers' share under Rule 51-B stands terminated from 01 Aug 2018 by ESI Corporation.

Effective from 01.07.2019 onwards, rates of ESI contribution have been reduced to 0.75% employee share and 3.25% employer share.

@Akhil Bhartiya,

Thanks for your response. It will be of great help if you can share a circular from ESIC regarding the termination of the same. I can only find the 2016 notification online.

Thanks.

Dear Prakhar Pandey,

PFA:

1. Gazette notification dated 06.10.2016 pertaining to the reduction of ESI contribution rates in the newly implemented area; and
2. Circular dated 13.02.2017 giving clarification on the reduction of ESI contribution rates in the newly implemented area.

These reduced rates were applicable for 2 years up to 06.10.2018. This clarification is given in the said circular dated 13.02.2017.

Thank you, sir. As much as I can understand from the 2017 clarification, New Area rates are applicable with effect from 06.10.2016 for a period of 2 years. That means up to 05.10.2018 only.
So even if any establishment gets notified as a New Area on 01.01.2018, it will get the benefit of reduced rates (as per 2016) only until 05.10.2018 and not for 2 years starting from 01.01.2018.