The bill proposed by Karnataka raises serious concerns that require deeper deliberation.(Image for representation only)
Credit: DH File Photo
The Karnataka State Government has proposed the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Bill, 2024 (Bill) to augment financial resources for the welfare of gig workers. The bill introduces a welfare fee paid by aggregators, an earmarked measure, where proceeds will fund specific services.
This is not the first such legislation. Firstly, because there are other state governments that have introduced or are considering funding welfare measures for gig workers through special legislation.
Rajasthan has enacted the Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act, 2023, wherein a worker welfare fee is imposed on aggregators.
Jharkhand has also proposed the Jharkhand Platform Based Gig Workers (Registration and Welfare) Bill, 2024, levying a gig workers welfare fee or cess on aggregators.
Second, there are other legislations (state and central) that have used the earmarking model for labour welfare. Some examples include the Limestone and Dolomite Mines Labour Welfare Fund Act, 1972, and the Iron Ore Mines Labour Welfare Cess Act, 1961, which were introduced by the central government. One example from the state level is the Kerala Coir Workers’ Welfare Fund Act, 1987.
The bill proposed by Karnataka raises serious concerns that require deeper deliberation. The bill stipulates that the gig worker welfare fee will be levied “at such rate (percent) of the pay of the platform-based gig worker in each transaction or on the annual state-specific turnover as may be notified by the state government.”
Fundamentally, the Constitution provides that there can be no taxation without valid authority of law. The Supreme Court of India has held that when imposing any tax, the character of the imposition, the taxable person, the tax rate, and the tax base (meaning, the value to which the rate is applied for computing tax liability) must be specifically clarified in the accompanying legislation. The same logic can be applied for a fee. The bill proposes that the tax rate and tax base will be notified later by the state government. Significantly, the bill leaves a choice in respect of the tax base, contrary to the SC diktat and the foundational canon of certainty that tax and fee legislation must uphold.
The Rajasthan and Jharkhand models use the base of “the value of each transaction related to platform-based gig workers,” and clearly state that the value of each transaction “shall not include any tax paid or payable”. As is evident, the Jharkhand and Rajasthan versions neither provide a choice in tax base nor are there references to state-specific turnover limits. Different business models are used by the wide gamut of aggregators, and it may be unclear what indicates the exact pay of the gig worker in each transaction. For example, is the surge charge paid by a consumer included in the pay of a specific gig worker?
Second, the proposed bill fails to explain the ‘sine qua non’ of an earmarked measure — that is, the earmarked purpose. It merely states that the proceeds shall be used for the benefit of concerned workers without detailing the programmatic schemes. Further, the bill uses varying language — general or sector-specific social security schemes in one instance, while general and specific social security schemes are mentioned elsewhere. The particulars are to be notified at a later point. It is strange that so-called labour welfare legislation makes no explicit mention of the specific welfare measures.
The omission of detailed provisions is unlike older labour welfare legislation referred to above. The earlier legislation had separate statutes detailing, on the one hand, the charging aspects (the imposition of the cess) and, on the other, the management and utilisation of the fund set up therein, which enumerated detailed welfare benefits.
Third, the true success of legislation lies not merely in its introduction but in its administration and execution. The bill simply stipulates that the earmarked fund shall be “utilised and managed in such manner as may be prescribed,” allowing for executive intervention on crucial aspects. While the bill contains certain commendable measures, such as an annual audit and statement of accounts, it lacks precise benchmarks to guide any such steps. Additionally, there ought to be an in-built review mechanism for the worker welfare fee.
The detailed review of the bill thus highlights the need for holistic thinking around the financing measures for supporting labour welfare. Good intentions must be backed by good governance so that workers’ rights are not compromised ultimately. For long, state-level legislation has played a constructive role in improving labour welfare through earmarking models in view of labour and labour welfare being in the Concurrent List of the Constitution. This spirit must continue.
(Ashrita Prasad Kotha is Assistant Professor of Law (Department of Revenue Chair); Madhulika T is a research associate, Centre for Labour Studies, NLSIU)