Moving from Manufacturing to Construction: What Legal Differences Should I Know About?

Dear all Seniors,

I've received an offer from one of the leading Infrastructure/Construction Companies in NCR, and upon accepting the offer, I have decided to join them soon. Currently, I am with a medium-sized manufacturing company and do not know much about the laws applicable to the construction industry.

Kindly advise on the specific differences (in terms of Statutory Laws and rules) that exist. Are there any special laws applied to this industry, or are they the same as those in manufacturing?

Please help me prepare for this opportunity. I look forward to your positive contributions.

Regards,
Rahul

Dear Rahul,

As requested by you, previously you were in a manufacturing company, which falls under the Factories Act. However, construction companies are categorized under the service industry. You may mainly concentrate on the Contract Labour Act; the remaining acts are the same, but a few registers need to be maintained as per the Shops Act.

Puttaraju.M

Thanks Puttaraju.M,

I understand from your reply that the Service Industry/Construction Industry comes under the purview of the Shop & Establishment Act, and people involved would be more of contract employees. Could you please explain this a little more? Like, what are the registers/documents/important licenses to be obtained from the authorities, and what would be the core activity of an HR/personnel employee in this kind of industry?

Seniors, please input.

Thanks & Regards,
Rahul

Dear Rahul,

The construction industry comes under the service category. The taxes applicable to this industry are as follows:

1. Income tax as per the registration of the firm.
2. Value Added Tax, currently at 2% under the composition scheme. You may utilize the input and output tax credit facility. I believe using the first option is better. The VAT system is based on self-assessment.

3. Service tax is a levy introduced by the government on 10.09.2004 at a rate of 10% tax and an education cess of 2% on the service value. Currently, the tax rate is 12% with a 3% education cess on the gross amount charged. The gross amount charged includes materials provided by the service receiver free of cost. The service provider is responsible for paying service tax whether the tax is received from the service receiver or not.

The information provided here is brief. If you require more details on the taxation of the construction industry, please visit the nearest bookstore and look for a book titled "Taxation of Construction Industry" and read it thoroughly.

Best wishes

Dear Rahul,

It is the Building and Other Constructions Welfare Act (BOCW Act) that you must be aware of, get registration under it, and have to pay 1% cess on the total cost of construction.

If you are engaging contract laborers, as you obviously do, then the Contract Labour Act also applies, and you have to take a license under it.

Regards