Understanding BOCW Cess Calculation and Construction Cost Assessment

Dear Expert,

Please urgently shed light on the following query: How do I calculate the correct Cess as mentioned below?

A) If the total amount for Cess calculation is Rs. 1000, 1% Cess on Rs. 1000 = Rs. 10. If the paid compensation under W.C is Rs. 2, then the Net Cess Payable would be (Rs. 10 - Rs. 2) = Rs. 8.

Or

B) If the amount for Cess Calculation is Rs. 1000 and the paid compensation under W.C is Rs. 5, the Total Amount for Cess Calculation would be (1000 - 5) = 995. 1% Cess payable on Rs. 995 = Rs. 9.95.

Which one is correct, A or B?

Regards,
Sacheein

Dear Sacheein,

The workmen's compensation is entirely different from the BOCWW Cess. The workers' compensation can be reimbursed if your company holds the workers' compensation policy. The BOCWW Cess must be paid a minimum of 1% and a maximum of 2% of the contract value.

The only difference is that some state governments are insisting on the payment from the contractors, while some state governments are insisting on the payment from the principal employer.

Thank you.

The Building and Other Construction Workers (BOCW) Act of 1996 specifies that 1% of Cess is to be deducted from the contractors' bills and deposited into the Welfare Board. This calculation is based on the construction cost of the project, excluding expenses related to land and labor welfare.

The Rs.10/- deposit is distinct, as it involves contributions from both employees and employers solely for their welfare.

Sudhir Bhardwaj

Dear Sacheein,

Your query is on how to calculate cess under BOCW Act.

Calculation of cess depends upon the procedure laid down by the appropriate government/cess collection and assessment authority.

Cess is payable at 1% on the cost of construction, which includes all expenditure incurred by an employer in connection with the building or other construction work, excluding (i) the cost of land and (ii) any compensation paid or payable to a worker or his kin under the Employees Compensation Act, 1923.

It seems you are from Mumbai, i.e., in Maharashtra. The Cess is payable from 01.01.2008 onwards as per Notification No. BCA 12007/788/Labour 7 dated 21.04.2008 by the Government of Maharashtra.

The Cess Collecting and assessment authority in Mumbai Municipal Area is MCGM. MCGM started collecting the cess from 01.07.2010 via its circular dated 30.09.2011. The said circular is attached herewith for your ready reference.

According to my understanding, the construction value is calculated by MCGM based on the index rate of land as per ready reckoner and construction area. This is as per the circular of MCGM dated 30.09.2011.

The cess is payable at 1% on this construction value as calculated above.

If you have paid any compensation to any employee under the Employees Compensation Act, such amount should be subtracted from the construction value calculated as above.

Kindly help me in getting the following GR and Circulars as early as possible:

- Govt. Circular No. BCA 12007/P.K.788/Labour7 dated 21/04/2008
- Govt. Circular No. BCA 12007/P.K.788/Labour7 dated 26/10/2009
- Notification dated 16/04/2008
- Govt. Circular No. BCA 2009/P.K.108/Labour7A dated 21/07/2011

Thanks & Regards,

Deepak Deshpande
9870010989
For Deshpande Associates

Dear Sacheein,

The workmen's compensation is entirely different from the BOCWW Cess. The WC can be reimbursed if your company holds the WC Policy. The BOCWW Cess must be paid at a minimum of 1% and a maximum of 2% of the Contract Value.

The only thing is some state governments are insisting on payment from the Contractors, while some state governments are insisting on payment from the Principal employer.

TN asks for only 0.3% of civil construction cost from the principal employer.

Pon

Dear HR Folks,

I have a question on the BOCWW Act - 1998 (General). Why was the act exempted on the cost of land and compensation paid or payable to a worker or his kin under the Employees Compensation Act 1923 for the calculation of cess?

Thank you.

Dear STM, The cost of construction is ascertained by the authorities after due inspection and from the Work Orders issued by the Employer. Normally, the Work Orders will not have the valuation of the land as the same is inappropriate to show in the WO, and the cost of land varies with location and from time to time. The compensation paid will not be predicted, and the cost of compensation as per the EC Act, 1923, will be paid to the worker/legal heir, and it does not add any value to the construction. Hence, both are not added in the BOCWW Cess.

Hope you understood the logic behind the lawmaking. If you have any other doubts, please do inform so that our learned members can clarify for you.

Dear Korgaonkar, this question should be directed to the lawmakers and not HR folks. HR folks will not have the answer to it. Then don't answer if you can't!

The BOCWW Act of 1998

Dear Boss, thanks for the information. In addition to that, the BOCWW Act of 1998 has a special focus on the welfare of building construction and other construction workers. The Act directs the governing body to ensure the proper use of the cess on this labor, but it's not happening in entire India.

Here, cess is only liable on costs where workers are involved or worked in construction, and worker-related expenses are directly included in the project cost. Land value and compensation costs are direct costs, and the investment of principals and workers is involved only in the alteration of land, with wages and compensation being part of any damages to workers.

I think it's totally justifiable!

Dear Everyone,

When doing the project construction cost estimate, what items are included/excluded in the CESS assessment Form I? Without being pedantic, the law states everything is 1% of the entire project cost except for land cost. But in reality, it mostly depends on the assessing officer. I heard that certain items can be challenged (such as elevators, as it can be argued that these are not part of the "construction cost").

Does anyone have experience with such an item list?

Many Thanks

We have obtained plans approval from the Department of Factories for our project and subsequently acquired the license to operate a factory. However, we have recently received a notice from BOCW stating that we are required to pay a fee based on the total project cost, which includes imported machinery. Does the machinery component attract BOCW charges?

In BMC area, whether the cess is based on the ready reckoner rate or the construction cost?

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Thank you!

Dear Korgaonkarji,

The cess is calculated at 1% of the ready reckoner rate as per the attachment. This is for the Mumbai region. However, this is applicable for pure residential and commercial buildings. Would it be different for factories or other industries? Is there a different circular for it? Or is it dependent on the contract value of the construction? So, would the work order be the prime document?

Dear Sir, I am looking for construction work site HR. We need to complete the BOCW registration of CG state. My question is, what is the frequency of construction site cess payment? In our work order, the payment of cess value needs to be ensured every month, totaling 1% of the RA bill submitted to the principal employer. It is a private construction work site under a private company.

Kindly provide your valuable suggestions. Also, what are the BOCW compliance checklists, acts, and rules that we need to ensure on a month-to-month basis? Kindly share the details.

Regards, BKM