Are BOT Projects Exempt from the 1% Cess Under the BOCW Act? Seeking Guidance

I am working in the construction company on its BOT project. As per the Building & Other Construction Workers Act, the contractor is required to pay 1% cess to the government of the construction cost.

My question is that ours is a BOT (Build, Operate & Transfer) project. Can anybody guide me on whether we will be getting any exemption under this act, since we are not the contractors.

Please reply.

Engagement of labor in construction is the criterion for the imposition of Cess, and there is no exemption from it.

Dear Member,

As we all know, this cess is utilized for the welfare of the Building Workers, and therefore, we do not expect any exemption in not imposing this cess on the employers in SEZ areas by the State where this is applicable. Moreover, you can also seek help from the labor department for your query.

With Regards,
R.N.Khola

Hi, can anyone confirm if a 1% Labour cess is applicable in projects undertaken in SEZ areas?

Dear Members,

I apologize for joining late here.

I would like to inquire about my friend who is managing a BOT project, specifically whether he is hiring construction workers and incurring construction costs for the project. If the answer is yes, then he falls under the definition of an 'employer' as per section 2(1)(i) of the BOCW Act, 1996.

Once we establish his status as an employer, we need to consider the provisions of the BOCW Welfare Cess Act, 1996. Section 3(1) of this Act states: "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 a rate not exceeding two percent, but not less than one percent, of the construction cost incurred by an employer, as specified by the Central Government through notifications in the Official Gazette." It is known that the Central Government has set this cess at 1% on the construction cost through notification no. SO 2899 dated 26.09.96. Therefore, the employer is liable to pay a cess of 1% on the construction cost.

Regarding exemptions from the cess under the Act, Section 6 of the BOCW Welfare Cess Act, 1996, states: "Power to exempt. Notwithstanding the provisions of this Act, the Central Government may, through notifications in the Official Gazette, exempt any employer or class of employers in a State from the cess payment under this Act if a similar cess is already levied and payable under any existing law in that State." This indicates that only the Central Government can grant exemptions if a corresponding law in the State already imposes a similar cess. If my friend's BOT project is in a State where such a cess exists, he can seek exemption from the Central Government. However, if that is not the case, he cannot avoid paying the cess.

Now, turning to another friend's query about SEZ projects and cess payment, I regret to inform that since only the Central Government holds the power to grant exemptions, any exemptions given by a State would be deemed void by a court of law.

Regards and best wishes.

jpratap

Hi,

The person who engages the workers is the contractor, but in some cases the main contractors engage sub-contractors. In this case, the person who has a labor license in his name will be responsible for obtaining BOCW Registration as well. However, the primary condition is that the workers must be more than 10 in number.

We are in the construction industry, constructing buildings based on design drawings and required construction materials supplied by the main contractor, developer, or landowner. We employ laborers for which we bill the concerned main contractor, developer, or landowner. We have obtained a license under the Contract Labour (R&A) Act and the BOCW Act. The statutory authority has sent us a notice to pay cess. In this scenario, can anyone please clarify whether we have to pay the cess or if it is the responsibility of the main contractor, developer, or landowner?

With Regards,
N. Mohan

Dear Mr. Pratap Sir,

I have two queries on BOCW Welfare Cess Act-1996.

1. Is machinery used in the construction industry included in BOCW Cess? Are some states giving exemptions on machinery? What is the position of A.P. & Telangana?

2. We have not registered under BOCW Act and not paid BOCW Cess for the last 10 years. If we register under the BOCW Act and start paying BOCW Cess, will they collect cess from us for completed projects?

I want a reply at the earliest.

Thanks & Regards,

M. Ranjan
Hyderabad

Dear Mr. Ranjan,

Answer to your queries is as follows:

1. Cess is not payable on the cost of machinery used in construction. However, the wages paid for the operation of such machinery are included in the cost of construction, and cess is payable on such paid wages.

2. Registration Under the BOCW Act, 1996

(a) You are required to get your 'establishment' registered under the BOCW Act, 1996. If you don't, you can be prosecuted.

(b) Although the cess is payable by employers on the cost of construction of their establishment with effect from November 1995 as per the BOCW Cess Act, 1996, different state governments have started implementing this act on different dates. Hence, in your case, the cess is recoverable from you with effect from the dates as notified by the respective State Governments.

Best wishes and regards.

Will building cess of 1% come under cement industries? Kindly provide clarification with the recent Government Order. Thank you.

Is there any proof or government notice validating this? (Cess is not payable on the cost of machinery used in construction. However, the wages paid for the operation of such machinery are included in the cost of construction, and cess is payable on such wages.)

Thank you.

Regards