Is Our New Business a Separate Entity or Just a Branch? Seeking Guidance on EPF Coverage

Hi, I am working under a sole proprietorship company with 25 employees. We are registered under EPF & ESI and are filing properly. Our company's proprietor has started a new separate establishment with a separate GST and the same PAN. Currently, 8 employees are working in this new establishment, and the nature of the business is entirely different. However, EPF officials are considering this as a branch of the first company according to the MP Act Section 2A, and they are directing us to cover the second company as well. Please guide us on the correct path.

Dear Colleague, if you read Section 2A of the EPF Act 1952, it states that an establishment includes all departments and branches.

Establishment to include all departments and branches

For the removal of doubts, it is hereby declared that where an establishment consists of different departments or has branches, whether situated in the same place or in different places, all such departments or branches shall be treated as parts of the same establishment.

Hence, you need to provide all documents that the two businesses are different in nature and have no connection between them in terms of management, employer and employee relations, as well as day-to-day operations. You may represent to the Regional Provident Fund Commissioner with all documents, and based on the outcome of the discussion, you may decide further.

If you consult any retired EO or Assistant Commissioner of PF, they will help you to overcome or provide more clarity on this subject matter.

There is some basic discrepancy in your post. A proprietorship organization is, by nature and law, the same as the proprietor himself. In view of that, even if your proprietor creates a new trade name, there is no legal distinction between them.

PAN and GST Number Concerns

In view of that, how did he get a new (separate) PAN number and GST number? A proprietor cannot get 2 PAN numbers. So you need to check that first. Either he did it without disclosing his existing PAN number (a criminal offense under the money laundering act) or he did not link his PAN to his Aadhaar, which also will cause a problem.

PF Coverage Implications

If the person is the same (different PAN number notwithstanding), he is liable to be covered under PF as one entity, and they will never accept that he has done it for genuine purposes. If, on the other hand, the actual constitution is different from what you think, you can use that to resolve the problem with the PF department.

Consideration for LLP Conversion

In the meanwhile, it may make sense for your boss to convert his entities into separate LLPs, which have different partners to prevent this problem.