What Is Labour Cess In Construction?

What Is Labour Cess In Construction
The Government of India has made it mandatory for every State government to constitute their Building and Other Construction Workers Welfare Boards. The BOCW Cess under the BOCW Act mentions a taxable amount paid by the registered proprietor against the project’s cost.

The Government has ratified various provisions around BOCW Cess under the BOCW Cess Act, 1996 and Rules, 1998. 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) cost of land and (ii) any compensation paid or payable to a worker or his kin under the Employees Compensation Act 1923.

This article will discuss the concept and calculation of BOCW cess in detail.

How much is Labour cess in India?

States collected Rs 78,521 crore as cess from construction sector, 54.91% remains unutilised States have collected over Rs 78,521.24 crore as cess for the welfare of workers in the past 25 years – with Maharashtra and Karnataka topping the list – but have spent only around 45 per cent of it so far.

  • The statistics collected by the Ministry of Labour and Employment showed that the states and union territories together spent only Rs 35,399.40 crore (55.09 per cent) and have Rs 43,121.84 crore or 54.91 per cent of the cess collected as unspent.
  • The Building and Other Construction Workers Cess Act, 1996, provides for the levy and collection of cess at 1 per cent of the cost of construction.

This cess is collected by States in the Building and Other Construction Workers Welfare Cess Fund. Among the states, the top collector of cess was Maharashtra at Rs 11,794 crore but 73.02 per cent or Rs 8,612.33 crore of the cess collection remain unspent.

  1. For Karnataka, the collection was Rs 11,108.87 crore but the spending was just Rs 3,656.96 crore, leaving Rs 7,451.91 crore unspent.
  2. When it comes to the unspent funds, Uttar Pradesh tops the list with Rs 4,270.81 crore.
  3. It has collected Rs 7,144.50 crore in the past 25 years, but it spent only Rs 2,873.69 crore.

Tamil Nadu followed UP – Rs 2,873.04 crore or 61.79 per cent of Rs 4,649.11 crore remained unutilised. There are two states that have bucked this trend – Kerala and Mizoram actually spent more than what it collected as cess to settle welfare claims of construction workers.

  1. Erala collected Rs 2,533.34 crore while it spent 3,914.32 crore – 54.51 per cent more than what it collected.
  2. Similarly, Mizoram collected Rs 134.48 crore and spent Rs 139.72 crore or 3.8 per cent more than the cess it collected.
  3. The capital Delhi has 82.93 per cent or Rs 2,281.22 crore out of Rs 2750.5 crore in the unspent account while West Bengal has 65.28 per cent or Rs 2,382.21 crore out of Rs 3,648.69 crore unutilised, according to a written response by Minister of State for Labour Rameswar Teli to a question raised by BJD’s Amar Patnaik in Rajya Sabha last week.

Haryana, which comprises a construction hub Gurugram near Delhi, collected Rs 3,337.23 crore, but spent only Rs 1,395.61 crore. Gujarat collected Rs 2,013.84 crore but spent Rs 545.29 crore. In March 2020 just before the national Covid-19 lockdown, the then Labour Minister Santosh Gangwar had written to states to dive deep into over Rs 52,000 crore cess fund and transfer money to around 3.5 crore workers registered with authorities.

It appears that states have dispersed around Rs 10,000 crore to workers in the past two years. Congress president Sonia Gandhi had written to Prime Minister Narendra Modi in March 2020, saying that the Labour Welfare Boards collected cess amounting to Rs 49,688.07 crore till March 31, 2019, out of which only Rs 19,379.92 crore were spent.

In August 2017, the Parliamentary Standing Committee had also raised similar concerns saying the Welfare Boards set up by states collected Rs 32,632.96 crore as cess towards the welfare of construction workers in 20 years, but spent only a dismal 23 per cent or Rs 7,516.52 crore, which included Rs 375.82 crore towards salaries of the officials who run the state welfare bodies.

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What is Labour cess in West Bengal?

Building & Other Construction Workers’ Welfare Cess Act, 1996 Building & Other Construction Workers’ Welfare Cess Act, 1996 and Building & Other Construction Workers’ Welfare Cess Rules, 1998 aims to provide for the levy and collection of Cess on the cost of construction incurred by employers with a view to augmenting the resources of the Building & Other Construction Workers’ Welfare Board constituted under the Building & Other Construction Workers’ (Regulation of Employment & Conditions of Service) Act, 1996.

All employers as defined u/s 2(1 )(i) of Building & Other Construction Workers’ Act, 1996 shall deduct Cess @1% of the cost of construction and transfer the proceeds by way of demand draft / cheque to the West Bengal Building & Other Construction Workers’ Welfare Fund. The cost of construction shall include all expenditure except cost of land and any compensation paid of or payable to a worker or his kin under the Workmen’s Compensation Act, 1923.

The Cess shall be paid by the employer to the respective Regional Labour Offices within 30 days from completion of construction or within 30 days on which assessment of Cess payable is finalized, whichever is earlier and for that matter within 30 days of collection.

An employer may pay advance Cess on the basis of estimated cost of construction along with notice of commencement of work. If the construction exceeds one year the final Cess payment is to be made after the total completion of work. The government has notified all Minimum Wage Inspectors as Cess collectors, all Assistant Labour Commissioners as Assessing Officers and all Deputy Labour Commissioners as appellate authority under the Act and Rules.

Every Employer shall within 30 days of commence of his work or payment of Cess as the case may be furnish to the Assessing Officer, information in Form I. On receipt of demand draft / cheque of Cess from depositors the respective Regional Labour Offices shall issue a Cess payment receipt in prescribed format and thereafter deposit the drafts in the respective Cess accounts of the bank.

The Bank branches shall then transfer the amount to a consolidated central account of the Board. Finance Department issued a Circular vide no.853-F, dated: 01.02.2006 and vide no.6895, dated: 11.09.2006 stating forth the manner of collection and remittance of Cess by the Departments and Government Undertakings Concerned.

: Building & Other Construction Workers’ Welfare Cess Act, 1996

What is Labour cess in Karnataka?

Sub: Collection of Cess at the rate of 1% of the cost of the Construction incurred by the builder/employer etc ; under the Building & Other Construction Workers Welfare Cess Act, 996.

What is Labour cess Telangana?

i Maintenance of Industrial peace.
ii Ensuring wages, safety, welfare, working hours, weekly & other holidays, leave, bonus and gratuity etc. for workers.
iii Promotion of welfare and social security of workers by implementation of schemes.

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i Maintenance of harmonious Industrial relations by resolving industrial disputes and facilitation of fair wage settlements through conciliation and adjudication. ii Promotion of Welfare and Social Security of workers by implementation of schemes of A.P. Building and Other Construction Workers welfare Board, A.P. Labour Welfare Board and A.P. State Social Security Board for Unorganized Workers, iii Securing safety, welfare, specified working hours, weekly and other holidays, leave, appointment letters, identity cards etc. to the workers by implementation of 22 Central and 4 State Acts. iv Fixation, revision and ensuring payment of Minimum Wages to the workers in 73 Scheduled Employments. v Settlement of claims for wages, Employees’ Compensation, Gratuity, Bonus etc., for workers through summary quasi-judicial proceedings. vi Registration and Licensing of Establishments and collection of labour welfare fund. Registration of Trade Unions. Rescue and release of child labour. Certification of Standing Orders for Industries. Assessment and collection of Cess from construction works. Registration of building and other construction workers. Registration of unorganized workers.
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i Labour Acts implementation. ii Conciliation under Industrial Disputes Act. iii Quasi-judicial under Minimum Wages Act, Payment of Wages Act, Equal Remuneration Act, Payment of Gratuity Act, Shops and Establishments Act and Employees Compensation Act iv Registration of Trade Unions. v Registering/Licensing of Shops, Establishments. vi Certification of Standing Orders. vii Collection and assessment of Cess from construction works. viii Registration of building and other construction workers and unorganized workers.

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1 Conciliation: The Industrial Disputes Act, 1947 provides machinery for settlement of industrial disputes through conciliation and adjudication. The thrust of Conciliation is to avert strikes, lockouts and other work stoppages and thereby promote harmony and industrial peace. The Officers from the cadre of Asst. Commissioner of Labour to Commissioner of Labour have been notified as conciliation officers under Industrial Disputes Act, 1947. They take up industrial disputes existing or apprehended and resolve through facilitation of negotiations between the workers and managements. The disputes remained not resolved in conciliation would be referred to Industrial Tribunals/Labour Courts for adjudication. The Industrial tribunal cum Labour Courts are functioning in Hyderabad. 2 Quasi-Judicial Activities: The Officers of Labour Department from Asst. Commissioner of Labour to Commissioner of Labour have been notified as Quasi-Judicial Authorities under various labour Acts for expeditious settlement of claims for wages, gratuity and compensation etc. and reinstatement in service in Shops & Establishments. The important quasi-judicial authorities are authority under Minimum Wages Act, Commissioner for employees compensation under Employees Compensation Act, Controlling Authority under Payment of Gratuity Act and Authorities under Shops and Establishments Act. 3 Implementation of Welfare and Social Security Schemes:

a. The Labour Welfare Board: Established under A.P. Labour Welfare Fund Act, 1987. The Board formulates welfare schemes and are implemented by the labour department. Workers in Factories, Shops and Establishments, Motor Transport Undertakings, Societies and Trusts are covered. The main source of fund is contribution Rs.7/- per worker per year, unclaimed wages, other sources of income like building rent and grants made by the Government. The Asst. Commissioners of Labour receive applications and settle claims under the/schemes
b. The Building and Other Construction Workers Welfare Board: Established in 2009 under Building and other Construction Workers (RE&CS) Act, 1996. The Board formulates and are implemented by the labour department for the building and other construction workers. The source of fund is cess levied on cost of building and other construction works, 1% cost of construction. The Board registers the building and other construction workers as beneficiaries and extends benefits under the Schemes through Labour Department. The Deputy Commissioners of Labour settles the claims and release benefits under the schemes.
c. The State Social Security Board for Unorganized Workers: is being constituted under the Unorganized Workers Social Security Act, 2008 for formulation and implementation of schemes for unorganized workers

/td> 4 Inspections and Prosecutions: The officers of the department have been notified as inspectors under labour Acts and statutory inspections taken up in accordance with rationalized and systematized inspection procedure to ensure safety, welfare and conditions of service of workers. Prosecutions are initiated on serious violations. 5 Registration and Licensing: Establishments are Registered/ Licensed and renewed under respective Acts like A.P. Shops & Establishments. Act, Motor Transport Workers Act, Building and Other Construction Workers Act, Beedi & Cigar Workers Act, Contract Labour Act, Inter State Migrant Workmen Act etc. Trade Unions are registered under Trade Unions Act. Building and other construction workers are registered as beneficiaries. Officers from Asst. Labour Officer to Commissioner of Labour have been notified as registering/licensing officers. 6 Implementation of Minimum Wages: Under the Minimum Wages Act, 1948, minimum wages are fixed on the basis of basic survival needs of the workers and their families and revised once in five years. Cost of living allowance (VDA) is notified once in six months effective 1st April and 1st October. Minimum wages have been notified for 73 scheduled employments including 65 industry related employments and 8 agriculture and allied employments. Minimum Wages have been fixed on the recommendations of the State Minimum Wages Advisory Board/Committees. The Officers of the department who have been notified as inspectors file claims before the authorities for difference in wages in case of payment of less wages noticed on inspections/complaints. The officers of the department are notified as Authorities to hear and settle the claims expeditiously by summary proceedings. 7 Employees Compensation: The Officers from Asst. Commissioner of Labour to Commissioner of Labour have been notified as Commissioners for Employees Compensation under the Employees Compensation Act, 1923. The Asst. Commissioners of Labour and Dy. Commissioners of Labour hear claims and award compensation in cases of accidental death or disability occurred in the course of employment. The Commissioners also apportion the amount of compensation among the dependents of the deceased workers and secure the apportioned compensation in case of minors and legally disable persons, in fixed deposits. 8 Elimination of Child Labour : The Department enforces the Child Labour (Prohibition & Regulation) Act, 1986 and other child labour laws towards elimination of child labour. State Action Plan for elimination of child labour prepared in 2009 has been revised in 2013 in the wake of Right to Education Act, 2009. The action plan aims at total elimination of child labour in the State. Institutional mechanism like State Level Monitoring Committee, State Resource Centre and District Resource Centre has been established and detailed strategies are envisaged. Child labour tracking is done through a web enabled application. The main approach of the department is regular enforcement drives along with publicity. As per the directions of the Supreme Court child labour rehabilitation-cum-welfare fund is collected towards welfare of the children rescued from hazardous employments. 9 Activities under other Important Acts:

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a. Payment of Wages Act, 1936: An Act to regulate payment of wages without delay and illegal deductions.
b. Shops and Establishments Act, 1988 : Registration and Renewal of Shops and Establishments, Regulation of Service Conditions of the Employees working in Shops and Establishments viz. working hours, holidays, leave, Welfare, safety and health measures etc
c. Contract Labour(Regulation and Abolition) Act, 1970: Registration of Principal employers and Licensing of Contractors – Regulation of Service Conditions of the Contract Employees viz. wages, working hours, holidays, leave, Welfare and health measures etc.
d. Inter State Migrant Workmen(ROE&COS) Act, 1979: Registration of Principal employers and Licensing of Contractors engaging Inter State Migrant Workmen and regulation of their service conditions viz. wages, working hours, holidays, leave, welfare and health measures etc
e. Industrial Employment(Standing Orders) Act, 1946: Certification of Standing Orders of all establishments having 50 or more employees. Standing Orders specify certain service conditions of the employees viz. classification of employees, shift working, attendance, leave procedure, termination, transfer etc.
f. Beedi and Cigar Workers(Conditions of Employment) Act, 1966: Provides for welfare of the workers in beedi and cigar establishments and regulation of their conditions of work etc. Establishments are required to be licensed and renewed every year.
g. Payment of Bonus Act, 1965: Provides for payment of bonus to persons employed in establishments having more than 10 employees. The minimum bonus is 8.33% and the maximum is 20%.
h. Motor Transport Workers Act, 1961: Provides for regulation of conditions of Employment of Motor Transport Workers viz. hours of work, rest, leave, holidays, medical and welfare facilities etc
i. Payment of Gratuity Act, 1972: Provides for payment of gratuity to the employees engaged in factories, mines, oil fields, plantations, ports, railway companies, shops and establishments and educational institutions and for compulsory insurance. Maximum gratuity is Rs.10 lakhs.
j. Trade Unions’ Act,1926: Provides for Registration of Trade Unions and for regulation of their functioning.

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Why labour cess is deducted?

It is levied for building & other construction works of all establishments except on those buildings or other construction works to which the provisions of the Factories Act, 1948, or the Mines Act, 1952 are applicable.

Is it mandatory to pay cess?

Cess is imposed by the Government only when there is a need to meet specific expenditure for the Public welfare. Cess is to be discontinued once the objective is met. If a person’s income comes under the non-taxable slab of the Income Tax taxation slab, they are not required to pay the cess amount.