Cottage, small industries rue mandatory PAN rule for salary payment

Published On: July 19, 2019 03:30 AM NPT By: Republica  | @RepublicaNepal

Seek additional six months to enforce the new rule

KATHMANDU, July 19: Federation of Nepal Cottage and Small Industries (FNCSI) has sought additional time for enforcement of a provision that requires permanent account number (PAN) for any firm to make payment of salary to its staffers.

Stating that it was not feasible for small and cottage industries across the country to comply with the new requirement immediately, the FNCSI has urged the government to provide them some additional time.Shyam Prasad Giri, the president of the FNCSI, urged the government to give six additional months to make PAN mandatory for the payment of salary for staffers and workers.“The small and cottage industries largely represent informal sector in the sense that they do not have proper record or account keeping system,” said Giri. “You cannot enforce a provision by seeing the situation of Kathmandu. There are small industries which are running in far flung remote areas. They cannot implement these onerous provisions overnight," he further said, adding: "That is we have sought at least six months to begin implementing the new system.” Giri also warned that the enforcement of the new rule for cottage and small industries could stymie the SMEs.

The government has made it mandatory for any firm to deposit salary of their staffers in the bank account only after getting their PAN. Under the new requirement, a firm will not be allowed to deduct payment of salary or wages to any worker or staff without PAN as expenses. However, the new requirement is troublesome for medium and cottage industries, say leaders of the SMEs.

The umbrella organization of cottage and small industries has also urged the government to provide it a grace period to implement new social security system, online-based vehicle and consignment tracking system (VCTS) and value added tax (VAT) on transportation services.

“Since there was a verbal agreement with the Ministry of Labor, Employment and Social Security to gradually implement the new social security system for employees of cottage and small industries based on experiences of the large and medium industries, we have requested the government to extend the deadline for us,” said Giri.

Under the new social security system, each enterprise must be registered with the Social Security Fund (SSF). The enterprises will have to deduct and deposit 11 percent of the base salary of their staffers in the fund, while contributing 20 percent of the base salary from their side. Each contributing employee will be entitled to various social security benefits like medical treatment, accident and disability protection, dependent family protection and old age protection.Similarly, the VCTS will also have an adverse impact on transportation of raw materials and production of small and cottage industries, according to Giri. The FNCSI has sought at least one year period for implementation of the VCTS and VAT on transportation.According to a statement of the FNCSI, it will take small and cottage industries some time to train their staffers to use the app and online for entry as well as reliable Internet supply.

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