8/13/2019 Workers Welfare Fund

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Chargeability of WWF

Mode of payment and recovery

of WWF from industrial

establishment

Section 2(i) and 4

Section 4(1) of the Workers Welfare

Fund Ordinance, 1971 [the WWF

Ordinance] provides that every

industrial establishment, total income ofwhich in any year is not less than Rs.

100,000 shall pay to the Fund a sum

equal to two percent of so much of its

total income as assessable under the

income tax laws. The term total

income, defined in section 2(i) of the

WWF Ordinance, has same meaning

as in the income tax laws. Section 4(8)

of the WWF Ordinance also provides

that where any industrial establishment

fails to pay the amount due from it as

required, it shall be liable to pay an

additional amount equal to eight

percent per annum of the amount due

from the date it was originally payable

to the date on which it is paid.

There have been disputes with regard

to scope of total income for levy of

WWF and the courts held that WWF is

not chargeable on income covered

under presumptive tax regime as well

as that WWF should be charged after

adjustment of brought forward losses.

The Finance Bill now seeks to enhancethe limit of total income from Rs.

100,000 to Rs. 500,000. The Finance

Bill also seeks to substitute the

definition of total income provided in

the WWF Ordinance as follows:

Where return of income is required

to be filed under the 2001

Ordinance, the profit (before

taxation or provision for taxation)

as per accounts or the declared

income as per the return of income,

whichever is higher; and

Where the return of income is not

required to be filed, the profit

(before taxation or provision for

taxation) as per accounts or four

percent of the receipts as per the

statement filed under section 115

of the 2001 Ordinance, whichever

is higher.

Due to this proposed change in the

definition of total income in the WWF

Ordinance, wherever an industrial

establishment has profits as per

accounts, it will be required to pay

WWF irrespective of its taxability under

the 2001 Ordinance. Further, the

proposed changes in the WWF

Ordinance would also nullify the courts

judgments on the matter with reference

to levy of WWF on presumptive income

and after adjustment of brought forward

losses.

The Finance Bill also seeks to modify

the provisions of section 4(8) of the

WWF Ordinance to provide that if any

industrial establishment fails to pay the

amount of WWF shall be liable to pay

an additional amount as per provisions

of the 2001 Ordinance relating to the

mode and recovery of the income tax.

Consequently, non-payment / delayed

payment of WWF may attract additional

tax at 12 percent as provided in section

205 of the 2001 Ordinance besides any

other repercussions contained in the

2001 Ordinance.

Workers Welfare Fund

Significant Amendments