The Labour and Employment Ministry has requested the Finance Ministry to keep Employees’ State Insurance (ESI) and Employees’ Provident Fund (EPF) schemes out of the ambit of service tax as they are social security schemes.
“If the provisions of service tax are made applicable to the ESI schemes, the cost of insurance will increase to the extend of service tax,” Minister of State for Labour and Employment Harish Rawat said on Monday.
He said his Ministry has requested the Finance Ministry to consider “exemption of ESI scheme and EPF scheme from the applicability of service tax”.
Mr. Rawat said this to a written question in the Lok Sabha on Monday.
His reply came in the backdrop of the Department of Revenue sending demand-cum-show cause notice to ESI corporation which considered the ESI schemes at par with general insurance business and stated that activities of ESI Corporation are within the ambit of Insurance Act, 1938 and hence service tax provisions are applicable to it.
A similar notice has also been received by the EPFO.