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2. State Aid

Government subsidies and special relief resources allocated to support employers, and workers, in their efforts to maintain employment and pull through the crisis.

  • The Central Government on May 13, 2020 announced a special economic and comprehensive package of USD 270 billion which is equivalent to 10% of India’s GDP, to revive and boost the Indian economy which has predictably been impacted due to COVID-19 (“Package”). The Package was introduced as a part of the Government’s Self-Reliant India Movement. As a part of the Package, the Indian Government has granted several relief measures to different sectors to boost the economy and aid the employers to revive the losses that they have suffered due to Covid-19.
  • Further, with respect to social security contributions, certain relaxations have been brought in place to provide relief to both employers and employees during this crisis. Under the provisions of the Employees’ Provident Fund Act, 1956 and the rules and schemes made thereunder (“EPF Law”)[1]: (i) the rate of provident fund (PF) contribution has been reduced to 10% instead of 12% for the month of May, June and July 2020; (ii) penalties for late filing/payments have been removed for the lock down period; (iii) employees are permitted to claim advances from the PF account, subject to certain limitations. Certain compliances under Employees’ State Insurance Act, 1948 and certain state specific labour laws such as the profession tax law and labour welfare fund law, have also been eased out for the benefit of both the employees and the employers.
  • Certain States have currently exempted specific kinds of factories from complying with the provisions related to daily and weekly working hours, subject to certain limitations and conditions. This has been done with the intent of providing an opportunity for businesses to increase their productivity levels in the near future.

[1] The EPF Law is a social security legislation wherein both employers and employees of certain establishments are required to contribute 12% employee’s compensation (certain components of the compensation) to a government-controlled social security fund.

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