Who Pays the Cess Under the Building and Construction Workers' Welfare Act?

Dear Sir,

Kindly let me know who is the responsible person to pay cess under the Building and Other Construction Workers' Welfare Cess Act, 1996 and Rules 1998.

Thanks and Regards,
Puttaraju.M

Dear Mr. Puttaraju,

If any person carrying out building or other construction work, liable to pay the cess under section 3, fails to furnish any return under sub-section (1), the officer or the authority shall give a notice requiring such person to furnish the return before the specified date in the notice.

Satya

Dear Friends,

According to Section 3(1) of the Building and Other Construction Workers' Welfare Cess Act, 1996 (in brief the Cess Act), the cess is levied on the 'cost of construction' incurred by an employer.

The word 'employer' is not defined under the Cess Act; but according to section 2(d) of the Cess Act, the words and expressions used but not defined and defined in the Building and Other Construction Workers (RECS) Act, 1996 (in brief, the Main Act) shall have the meanings respectively assigned to them in that Act.

Under the Main Act, the word 'employer' is defined in section 2(1)(i) which says that in relation to an establishment, it means the owner thereof and includes:

(i) the authority or head of government department;

(ii) the chief executive officer or authority of a local authority; and

(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.

In the ultimate analysis, therefore, for the purpose of payment of Cess, we have to construe that person as the employer who has 'incurred the cost of construction'. Now, it would be easy to ascertain who the real employer is - whether a contractor or the owner. Even if the contractor pays according to his agreement with the owner, it is the owner from whom he gets reimbursement of the same. Hence, in my view, in real terms, the owner is the employer for the purpose of levy and collection of cess as per section 3(1) of the Cess Act.

Best wishes,

Jpratap

Mr. J. Pratap,

It is a very useful contribution towards labor welfare cess. Could you please clarify one thing on this? Is a subcontractor working under the main contractor liable to pay labor welfare cess? For instance, if a subcontractor is given hardly 10% scope of the total construction and is receiving payment directly from the main contractor or promoter, are they still liable to pay 1% labor welfare cess? If the liability to pay is by deducting from the subcontractor's bills, should the subcontractor be provided with any kind of certificate or challan copy to claim income tax exemption equal to the cess amount?

Could you please provide clarification on this matter?

T. Kumar
99400 85550
Chennai.

Dear Kumar,

Please go through the definition of 'employer'. The opening line states that it is the owner of an establishment. Hence, it is the owner who is to pay the cess.

Deduction at the source is done only in the case of government or PSUs, etc. The employer, i.e., the department, shall deduct cess from the bills of the main contractor. The main contractor may have appointed several subcontractors, and he may deduct the same from their bills so that ultimately he gets the cess reimbursed, which has been deducted from his bills.

A private owner has to pay the cess himself. The contractor or subcontractor may ask for a certificate of deduction for income tax purposes.

Wishes,
Jpratap

Almost all states and UTs are being monitored by the Honorable Supreme Court for the implementation of various directives.

Jpratap

Who is the authority to monitor, control, or inspect the implementation of the BOCW Act 1996 in the state of Maharashtra? Is it in any way connected with the State Labour Department? Could you provide the office address of the authority for Nagpur city.

I have a problem in this matter. In Orissa, there is a government project "Laying of pipeline" worth Rs 5 crore, of which 4 crore is the cost of C.I. pipe and 1 crore is the laying cost. Now, from which amount should I deduct tax from the contractor's bill? From the total 5 crore or from the 1 crore (labour part)? Please let me know.

Dear Ms. Shivani,

Greetings for the day :)

Please confirm about which state you want to know if it is applicable or not?

Dear Mr. Barasat,

Greetings for the day :)

It will be deducted from the 1 crore mentioned as the laying cost.

Look at the terms of the tender. If the tender document contains a 1% cess on the cost of construction and the cost specified by the contractor is 5 crores, that means it is inclusive of a 1% cess. By not deducting cess at the source, you would be favoring the contractor. Hence, the cess is to be deducted on 5 crores and not one crore. Study the 'cost of construction' as contained in Rule 3 of the Cess Rules 1998.

Best wishes,
Jpratap

Please read the BOCW Act of 1996 and BOCW Rules of 1998 to understand the purpose, concept, and scheme of the Act. Afterward, come up with specific questions in this forum, and we would be happy to answer them. I am sure you will find many answers within the Act and the Rules.

Best wishes,
jpratap

Dear all, Can anyone tell me about the PF and ESIC applicability to a construction unit? We are the principal employer who provides work to contractors for construction, but we have 6 staff members to handle the core work. Are PF and ESIC applicable in this scenario? If applicable, how should we proceed? How can we deduct the amount from the contractor's bill if they do not provide documents for wages?

Please do the needful.

Regards,
Raju S

Building and Other Construction Worker Act

Dear all, can anyone tell me about the PF and ESIC applicability to a construction unit? We are the principal employer providing work to contractors for construction, but we have six staff members handling the core work. Are PF and ESIC applicable? If applicable, how should we proceed? How do we deduct the amount from the contractor's bill in case of non-production of wage documents by the contractors?

Please do the needful. Reply via email or suggest using the phone number below.

Regards,
Raju S
[Email Removed For Privacy Reasons]
[Phone Number Removed For Privacy Reasons]

Dear all,

BOCW Welfare Cess Payment

The BOCW Welfare cess will be remitted to the concerned authority (state/central) to the appropriate BOCWW Board. As per the act, the cess limit is a minimum of 1% and a maximum of 2% will be collected. The amount fixed is if the project duration is within 1 year, then 1% of the contract value will be collected. If the project duration is more than 1 year, then the work done during the financial year will be considered. (For my project in Hyderabad, which was Rs. 150 crores, I paid Rs. 39,00,000 for the work done for Rs. 39,00,00,000 in the first year, and Rs. 30,00,000 for the work done for Rs. 30,00,00,000 in the second year). As this was done during the initial stage of enforcement of the act, the authorities did not form any checking provisions in their policies.

Presently, after making the cess payment, the BOCW Welfare commissioner, the inspector duly appointed by the appropriate authority, will come and inspect the relevant documents.

Purpose of the Act

The concept of this act is to utilize the funds for the welfare of the construction workers, who will be issued an identity card for those who worked continuously for a 4-month duration on payment of Rs. 50 per head. For renewal of the same, Rs. 12 will be charged every year. No construction worker will continuously work for more than 6 months, and no one will stay in a particular locality for more than one project. Hence, it is not practicable for the workforce to renew the same. However, if the workmen are highly influential, they can benefit from free medical benefits, accidental insurance, disability benefits, and their nominees can receive death benefits. Female workers can also avail maternity leave and medical facilities. (On paper).

Please do not disclose the secret of collecting the cess; it is mainly collected to bridge the difference due to a deficit in the financial budget up to a certain level only.

Exemptions

The payment of ESI is not applicable for the construction industry.

The BOCW Act is not applicable for the factories or industries registered under the Factories Act and Mines Act.

With warm regards,

S. Bhaskar

[Phone Number Removed For Privacy Reasons]

Could you please clarify what you mean by "Please do not disclose the secret of collecting the cess (it is collected mainly to bridge the difference due to deficit in the financial Budget up to a certain level only)" as suggested by you in the last few lines above.

Regards,
jpratap

Dear Mr. Bhaskar, please be clarified that the cess collected is retained by the State Building and Other Construction Workers Welfare Board. It does not go to the Government Exchequer at all; so the question of bridging the gap due to a deficit in the financial budget of the government does not arise. On the contrary, like any other private construction, the government also has to pay cess to the Board on the construction work being carried out by it.

Regards,
jpratap

Dear All,

I have a question: If I am constructing one building out of a big project of ten buildings in Maharashtra, do I have to make a partial payment or pay for the entire project? Kindly clarify.

Thanks,
AMIT - 9011481111