The Federal Constitutional Court (FCC) has reserved its verdict on an important dispute concerning the applicability of the Sindh Workers Welfare Fund Act, 2014, to establishments operating in more than one province. The proceedings arise from petitions challenging a Sindh High Court judgment which held that trans-provincial establishments were governed by the federal Workers Welfare Fund Ordinance, 1971, in light of a decision of the Council of Common Interests (CCI). The dispute raises a fundamental question regarding the legislative authority of provincial governments over establishments conducting business across provincial boundaries.
During the proceedings, representatives of the Sindh Revenue Board and Sindh Workers Welfare Board argued that provincial welfare legislation could apply to workers employed within the respective province following the 18th Constitutional Amendment. Conversely, counsel representing trans-provincial establishments maintained that the Sindh High Court had correctly relied upon the CCI’s decision and the constitutional limitations on provincial legislative authority. The arguments also referred to earlier judicial decisions concerning workers’ welfare legislation, including the distinction between provincial jurisdiction and federal regulation of trans-provincial establishments.
The outcome could have significant financial and compliance implications for businesses operating across Pakistan. An important aspect highlighted during the hearing concerns section 60A of the Income Tax Ordinance, 2001, particularly the deductibility of welfare fund contributions made under provincial legislation by trans-provincial establishments. The final judgment may provide much-needed clarity regarding the applicable welfare fund regime, the possibility of overlapping contribution demands and the associated income tax treatment. Until the judgment is announced, affected businesses should carefully review their existing positions, pending disputes and contribution arrangements.