Understanding BOCW Act: Who Pays the CESS, Principal Employer or Contractor?

Can anyone explain:

1. Under BOCW Act, who is responsible for effecting CESS payment to the government, either the principal employer or contractor?
2. If I am the contractor and have obtained a separate labor license under CL Act, what is my position?
3. If I am paying cess, on what part do I have to pay:
a. Against the total contract, OR
b. Against only the labor part?

Regards,
Sureshkumar

Dear Friend,

1) The definition of an employer is very wide under the Act and includes the principal employer and contractor.
2) Yes, as a contractor, you are also included in the definition of an employer.
3) Cess is to be paid on the total cost of construction (Civil); it excludes the cost of land and welfare contributions paid to employees, if any.

Regards

Hi,

The following abstract from the act may clear your doubts. In case you wish to refer further, please find attached the BOCW ACT.

(i) "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 through a contractor, or by the employment of building workers supplied by a contractor, the contractor.

Regards,
TRN MURTHY

I would be grateful if someone could provide me with a list of states that have framed rules under B&OCW Act 1996 as of the current date.

With warm regards,
JK Saini

Dear JK Saini,

Haryana and Delhi are among those that have framed their rules.

With Regards,
R.N.Khola

Dear Saini,

Almost all states have framed rules now as the matter is being monitored by the Honorable Supreme Court. Punjab has framed rules which are made applicable w.e.f. 01.10.2008.

Wishes,
jpratap

Dear all,

All states have framed their cess rules. In public sector companies, cess is to be paid by the client and deducted from contractor bills. In the private sector, cess may be deposited by the client or contractor, but it is the prime responsibility of the one who has registered under the BOCW Act as an employer. However, accountability will always remain with the client.

Dear all,

The above is not correct:

States have no power to frame cess rules. These have already been prepared by the Central Government in 1998.

It is correct that in PSUs or government constructions, the cess is deducted at the source from the running bills of the contractors, but it is not true for private constructions.

Please read rule 4 of the cess rules which prescribe the time and manner of collection of cess. For convenience, it is reproduced as under:-

"4. Time and manner of collection.- (1) The cess levied under subsection (1) of section 3 of the Act shall be paid by an employer, within thirty days of completion of the construction project or within thirty days of the date on which the assessment of cess payable is finalized, whichever is earlier, to the cess collector.

(2) Notwithstanding the provisions of sub-rule (1), where the duration of the project or construction work exceeds one year, cess shall be paid within thirty days of completion of one year from the date of commencement of work and every year thereafter at the notified rates on the cost of construction incurred during the relevant period.

(3) Notwithstanding the provisions of sub-rule (1) and sub-rule (2), where the levy of cess pertains to building and other construction work of a Government or of a Public Sector Undertaking, such Government or the Public Sector Undertaking shall deduct or cause to be deducted the cess payable at the notified rates from the bills paid for such works.

(4) Notwithstanding the provisions of sub-rule (1) and sub-rule (2), where the approval of a construction work by a local authority is required, every application for such approval shall be accompanied by a crossed demand draft in favor of the Board and payable at the station at which the Board is located for an amount of cess payable at the notified rates on the estimated cost of construction:

Provided that if the duration of the project is likely to exceed one year, the demand draft may be for the amount of cess payable on the cost of construction estimated to be incurred during one year from the date of commencement and further payments of cess due shall be made as per the provisions of sub-rule (2).

(5) An employer may pay in advance an amount of cess calculated on the basis of the estimated cost of construction along with the notice of commencement of work under section 46 of the Main Act by a crossed demand draft in favor of the Board and payable at the station at which the Board is located:

Provided that if the duration of the project is likely to exceed one year, the demand draft may be for the amount of cess payable on the cost of construction estimated to be incurred during one year from the date of such commencement and further payment of cess due shall be made as per the provisions of sub-rules (2).

(6) Advance cess paid under sub-rules (3), (4), and (5), adjusted to be adjusted in the final assessment made by the Assessing Officer."

The above sufficiently clarifies that for private construction, clause (4) of sub-rule (1) of rule (4) is applicable. At the time of approval of the plan, no contractor is in the picture. Therefore, I am of the firm opinion that for private constructions, cess has to be deposited by the owner and not the contractor.

We can have a detailed discussion on it.

Best wishes,

Jpratap

Dear Mr. J. Pratap,

In BOCW, there is no term "contractor/principal employer" in BOCW. Please read the definition of employer. An employer is only the one who is registered as an employer under BOCW, whether owner, contractor, or subcontractor.

Also, based on the BOCW Act, every state has framed rules regarding the safety and health of workers, not Cess. I agree with you.

Thanks

Dear Jiwanjot,

It is not correct that the word 'contractor' has not been defined in the BOCW Act. It has been defined in section 2(g) of the BOCW Act. The word 'Principal Employer' although not defined in the Act but it finds a place in Form - I of the BOCW Rules, 1996; and as you are aware, the rules are made to achieve the object of the Act. This reveals the intention of the parliament as to who will make an application for Registration of the Establishment. Punjab has defined the word 'Principal Employer' in its BOCW Rules, 2008 in clause (zr) of Rule 2.

Also, please be clarified that in BOCW, it is the 'establishment' which is required to be registered and not the employer. The registrable establishment is where the building and construction worker is carried on. In this connection, kindly read section 1(4) which tells us what establishments on which the BOCW Act is applicable. Keeping this in view, then read the definition of 'establishment', then of 'employer', and then section 7 of the Act which tells us who is required to get the establishment under construction registered under the Act.

Now the question would be who is the 'employer' who is required to make an application for registration of the establishment which is under construction. For this, kindly read the scheme of the Cess Act which further clarifies the 'employer' is a person who owns the establishment being constructed and who incurs the cost of construction for the same. He is the person responsible for payment of Cess and for this reason, for private construction, the owner is the employer; at the time of approval of building plans, he pays the cess; there are no contractors involved at that time. Since for private establishments, the owner is the employer, therefore, he has to make an application for the registration of the establishment which is under construction. However, in the case of the construction of any establishment of Govt. or PSUs, the contractor is the employer as defined in sub-clause (i) of section 2(1)(i) of the BOCW Act, 1996.

Best wishes,

Jpratap