Dear All,
Can anybody assist me in understanding the provisions of The Building & Other Construction Workers’ Welfare Cess Act, 1996 . ( 28 of 1996 ),regarding the responsibility of deduction of Cess under the Act, in case of the works being executed through engaging sub-contractors by the contractors for Principal.

From India, Jaipur

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Act doesn't clarifies the responsibility whether Principal Employer or Contractor is responsible for remittance of cess. Generally and on prima facie ground, Principal Employer is liable for remittance of Cess but they i.e. Principal Employer always insist Contractors to remit the Cess on reimbursement basis.
In your case I think you are sub contracting work to another contractor and in such case have you taken a permission of Principal Employer in subcontracting the same to another contractor? If yes then you should have mention/inserted clause of obtaining such registration to subcontractor and if no then you are responsible for the same.
A. Prakash

From India, Halol

I would like to add some more points,
1. Before payment of cess the respective contractor / subcontractor must obtained Registration Certificate Under BOCW Act {Building & Other Construction Workers (Regulation of Employment and Conditions of Services) Act 1996}
2. While the time of Cess Payment the registration number need to furnish in the respective form
3.One Percentage of Work Order Value {excluding all taxes} need to pay to the cess board along with details under Form IV of the act.

From India, Delhi

The applicable provision of law is Sec 2(i)(iii) of the BOCW Act, as per the section, employer in relation to an establishment,and includes,in relation to a building or other construction work carried on by or though a contractor, or by the employment of building workers supplied by a contractor, the contractor. As per the definition of contractor, it includes sub-contractor in its ambit(Sec 2g) and as per the Cess Act, the employer has the responsibility to pay
So in case of work executed through a sub-contractor, it is the responsibility of the sub contractor to deduct and make the cess payment

From India, Jamshedpur
Thanks Mr. A. Prakash & PRGHR,
Mine concern is whether the enactment adequately addresses to the issue of deduction and ultimate liability of payment of Cess, as to my poor understanding the Principal / owner is liable to pay Cess on entire value of project [inclusive of cost on material and labour component)how far the Principal is entitle to recover from Contractor and further Contractor from sub-contractor providing labour only

From India, Jaipur
This position of law was covered by Andhra HC in Government Of Andhra Pradesh vs Lakamsani Samba Siva Rao & Others 2015
In para 21 it makes it explicitly clear that contractors who raise structures for the principal employers should pay the cess. as I had mentioned in my post. The court further went on to state that Principle Employer can deduct the money from the bill to the contractor and remit the same
Delhi HC has summarised the position in the decision of Builders Association Of India And ... vs Union Of India (2007)
The Cess Act and the Cess Rules ensure that the cess is collected at source from the bills of the contractors to whom payments are made by the owner. The law acknowledges the fact that, in effect, the burden of the cess is passed on by the owner to the contractor.
Hope this helps

From India, Jamshedpur
Thanks everybody in the discussion for valuable contribution so far, we have to converge and reach at a final consensus on the scope of liability in the contingency when a turnkey operation (A) hires the services of a Contractor (B) who further engages a [sub-contractor ]labour contractor (C); who is to be registered under the Act, who has to pay, who has to deduct and who has to reimburse. Can Contractor (B) is within its rights to get reimbursement from his n number of Sub-Contractors (C).
Sorry, incase you feel that i am not so expressive in putting fourth my problem.

From India, Jaipur
I would like to add, who will make the payment of cess will define at the time of giving LOI/Work order to contractor. It should mention in the LOI who will be resposible for the payment. BOCW registration has to be done by both of parties i:e Principal employer and contractor. If contractor will make payment, then he will take reimbursement from principal employer. Or the principal employer will directly pay the cess to BOCW. Who ever will make Payment of cess will have to clear the Assessment of CESS from Labour Department of BOCW. They will check have u paid all the cess amount or not.
From India, Ahmadabad
Let’s proceed to understand the provision with regard to the applicability and the liability of payment of Cess under the Act. Relevant for the purpose would be the following:

• Section 2 (i) of The Building And Other Construction Workers (Regulation Of Employment And Conditions Of Service) Act, 1996, defines “employer” as:

“employer", in relation to an establishment, means the owner thereof, and includes,-

(i) in relation to a building or other construction work carried on by or under the authority of any department of the Government, directly without any contractor, the authority specified in this behalf, or where no authority is specified, the head of the department;

(ii) in relation to a building or other construction work carried on by or on behalf of a local authority or other establishment, directly without any contractor, the chief executive officer of that authority or establishment;

(iii) in relation to a building or other construction work carried on by or though a contractor, or by the employment of building workers supplied by a contractor, the contractor;

• Section 2 (g) of The Act, defines “contractor” as:

"contractor" means a person who undertakes to produce a given result for any establishment, other than a mere supply of goods or articles of manufacture, by the employment of building workers or who supplies building workers for any work of the establishment; and includes a sub-contractor;

• Section 7 of the Act, provides for registration of establishment

Registration of establishments.-
(1) Every employer shall,-

(a) in relation to an establishment to which this Act applies on its commencement, within a period of sixty days from such commencement; and

(b) in relation to any other establishment to which this Act may be applicable at any time after such commencement, within a period of sixty days from the date on which this Act becomes applicable to such establishment, make an application to the registering officer for the registration of such establishment:

Provided that the registering officer may entertain any such application after the expiry of the periods aforesaid, if he is satisfied that the applicant was prevented by sufficient cause from making the application within such period.

(2) Every application under sub-section (1) shall be in such form and shall contain such particular and shall be accompanied by such fees as may be prescribed.

(3) After the receipt of an application under sub-section (1), thc registering officer shall register the establishment and issue a certificate of registration to the employer thereof in such form and within such time and subject to such conditions as may be prescribed.

(4) Where, after the registration of an establishment under this section, any change occurs in the ownership or management or other prescribed particulars in respect of such establishment, the particulars regarding such change shall be intimated by the employer to the registering officer within thirty days of such change in such form as may be prescribed.

• To be read with Section 3 of the The Building And Other Construction Workers’ Welfare Cess Act, 1996

Levy and collection of cess.—(1) There shall be levied and collected a cess for the purposes of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, at such rate not exceeding two per cent, but not less than one per cent, of the cost of construction incurred by an employer, as the Central Government may, by notification in the Official Gazette, from time to time specify.

(2) The cess levied under sub-section (1) shall be collected from every employer in such manner and at such time, including deduction at source in relation to a building or other construction work of a Government or of a public sector undertaking or advance collection through a local authority where an approval of such building or other construction work by such local authority is required, as maybe prescribed.

(3) The proceeds of the cess collected under sub-section (2) shall be paid by the local authority or the State Government collecting the cess to the Board after deducting the cost of collection of such cess not exceeding one per cent, of the amount collected.

(4) Notwithstanding anything contained in sub-section (1) or sub-section (2), the cess leviable under this Act including payment of such cess in advance may, subject to final assessment to be made, be collected at a uniform rate or rates as may be prescribed on the basis of the quantum of the building or other construction work involved.


For the purposes of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (27 of 1996), a cess at the rate of one percent, of the cost of construction incurred by the employer is to be levied and collected, vide S.O. 2899, dated 26th September, 1996.

I purpose to converge on the following to discuss further:

(1) Cess is applicable on entire cost of the works[ generally contractor is not entrusted with the works equal to all the costs of the works] meaning thereby he can’t be burdened with payment of Cess on that part of the total costs of the works not assigned to it, therefore, it is the principal / owner who is the best point to levy Cess to achieve the objectives;

(2) There can’t be levying of Cess at different levels for the same works. i.e. it is either of the Principal or the Contractor or the Sub-Contractor/s who can be levied with Cess, not two or all of them;

(3) The Enactments needs amendments with regard to the fixation of liability at the individual level of owner, contractor an sub-contractors

From India, Jaipur

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