Construction Cess Confusion: Is It the Contractor's or Builder's Job to Pay?

Good morning to all my seniors,

I am working with a contractor (construction). We are working for various builders in NCR. I want to ask regarding cess which is covered in Delhi, Haryana & UP for labor welfare, i.e., 1% of the total bill value.

I want to ask, who is responsible for depositing the cess - the contractor or the builder?

The contractor has to deposit the cess amount. See Builders Association Judgment by Delhi High Court.

Dear friends,

Re: Labour Cess

It may be understood that the cess is to be paid by the person who incurs the cost of construction. In case a contractor undertakes to do construction work for the government or local authority, etc., cess will be deducted from his bills, and the government department is responsible for the deduction of cess at the source and to deposit the same with the Board. However, it may be noticed that although it is deducted from the bills of the contractor, the element of cess is already embedded by him in his tender amount. So, ultimately, it is the department that is paying and not the contractor.

In the case of private construction or construction by a builder, the same has to be paid by the owner, i.e., the one who incurs the cost of construction.

Best wishes,

Jpratap

Subject: Labour Cess

We are working with M/s JP Associated Limited, Pryagraj Thermal Power Project, Bara, Allahabad. I want to inquire about the cess which is covered in Delhi, Haryana, and U.P. for labor welfare, i.e., 1% of the total bill value. I would like to know who is responsible for depositing the cess, the contractor, or the builder?

Hi, my name is Pradeep Manda, and I work in a manufacturing company. Recently, we received a notice from the Labour Department regarding labour cess. We responded that we have already paid it, but they have included the cost of plant and machinery as well.

Could you please clarify whether plant and machinery should be included in the labour cess payment?

Thank you

Dear Colleague, As per the provisions of the Building and Other Construction Workers' Welfare Cess Act 1996, 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 may be prescribed.

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 (27 of 1996), at such rate not exceeding two percent but not less than one percent 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 may be 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 percent 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.

All the Best and God Bless, Dr. P. SIVAKUMAR Doctor Siva Global HR Tamil Nadu

Plant and machinery are not to be included in the calculation of labor cess. However, the cost of its installation may be included.

Regards,
Jacob Pratap
Deputy Labour Commissioner, Punjab (Retd.)