Implementation of labour codes, lower GST rate can help in formalisation of India’s workforce: ISF report

Removal of employment bottlenecks, urgency to implement the four Labour Codes, policy tweaks and a rejig in the goods and services tax rate for employment services are some of the measures suggested in a new report that could help in the formalisation of India’s workforce.

“With almost 85% informal labour, India needs a structural shift or overhaul to move towards formalisation. India requires a vital push for formal employment to raise sustainable livelihood through social security protection for over 40 crore informal workforce,” said a report titled India @ Work : Vision Next Decade by the Indian Staffing Federation.

As part of its recommendations, it has called for considering employment services as ‘merit services’, with lower GST slab tax rates at 5% with ICT benefits instead of the current 18% rate and has also suggested linking of skilling initiatives to employment.

It has contended that at present 5.4 million flexi or temp staff with an average monthly salary of Rs 18,000 generates annual spend of Rs 1.16 lakh crore that results in GST revenue of Rs 24,168 crore. “The lower GST slab rate of 5% will mean GST of Rs 6,713 crore, a let go of Rs 17,455 Crore annually. The same will impact by bringing in 40 crore informal workers, whose Rs 650 per month ESIC Contribution will fetch monthly contribution of Rs 2600 crore and annually Rs 31,200 crore. The GST annual contribution would be at Rs 49,728 crore,” the report said.

It has further highlighted that there are concerns among policy makers and academics alike that the collective institutions of restrictive labour legislations in the labour market, has hampered output, investment and formal employment expansion. “The proposition is to remove the bottlenecks,” it has suggested.

In terms of linking skilling to employment, it has recommended that initiatives can be propelled from district levels wherein skill companies to be prompted to mobilise daily wagers, train and move them to first time formal employment across sectors like construction, mining, transportation and manufacturing. “For these industries the scheme on social security support should be immediate,” it has said.

It has also highlighted that staffing industry can drive formalization and transform informal to formal employment. At present, the organised contract staffing industry represents 5.4 million contract workers and ensures protection for all associated workers, provides formal employment, adheres to the laws  and compliances of the land, it noted.