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Parliamentary Panel Seeks Strong Norms For Exemption to PF Trusts

The 31-member committee headed by Lok Sabha member Kirit Somaiya found that as many as 118 establishments had total corpus of less than Rs 1 crore and the last return filed by them dates back to 2014 and 2015.

PTI

Updated:July 24, 2018, 8:50 PM IST
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Parliamentary Panel Seeks Strong Norms For Exemption to PF Trusts
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New Delhi: A parliamentary panel has asked the government to frame strong guidelines for giving exemptions to establishments for managing provident funds of their employees through trusts with a view to keeping a check on misuse of such funds.

There were no clear guidelines for such exempted establishments to keep unclaimed deposits and some of them could be using them as their working capital, the panel said in a report that was tabled in Parliament today.

The 31-member committee headed by Lok Sabha member Kirit Somaiya found that as many as 118 establishments had total corpus of less than Rs 1 crore and the last return filed by them dates back to 2014 and 2015.

The committee feels that these establishments may not have taken any steps to benefit their subscribers, said the report.

"Strong guidelines for grant of exemption may be made which make it mandatory to take into account past performance, net worth, group performance as well as minimum strength of workers, collections, contributions and corpus of the company/establishment," it said.

The committee said there were hardly any compliance audit conducted by EPFO to check misuse of funds and audit mechanism gained momentum after the panel intervened.

"Hence the committee feels that some of the exempted establishments could be using the unclaimed deposits as their working capital.

"They (the committee) therefore desires that such possibilities should be considered while framing the guidelines and stringent penalty may be prescribed in order to deter the exempted establishment from carrying out such illegal activities," the report said.

In its reply to the panel, the government said legal provisions are already present in the law which deters organisations from utilising unclaimed amounts of the employees as the working capital.

No such incident has been reported from field offices, government said in the reply.

Among others, the panel has asked the government to revise the surcharge levied upon trusts who fail to invest the provident fund as per rules notified by the government as well as to conduct regular inspection.

An organisation is slapped with such a penalty if it deviates from the set investment patten three times, and if it is still found to be indulging in same activities, the exemptions from EPFO is cancelled.

"From the list of 317 such establishments, on whose Board of Trustees (BoTs) surcharge was levied, the committee observes that most of them were closed.

"The committee therefore, desires that such a futile exercise needs to be tackled with regular physical inspection by the regional inspectors and if required cancellation process be speeded up," it said.

The Standing Committee on Labour reviewing 'Exempted Organisations/Trusts/ Establishments from EPFO: Performance, Issues and Challenges' laid its report in Parliament on Tuesday.

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