Questions Legal

What is labor cess & when is it applicable?


Kishore Sagar

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The technological and economic advancement in India had demanded growth in infrastructure and a modified city plan. This was the reason why metropolitan cities of India manipulated an enhanced level of construction sectors and pollution as a result of it. This profuse advancement in infrastructure and buildings is due to the increasing population and economy. 

The difficulties faced by construction workers had specific attention to getting addressed in the judicial platform. The Building and Other Construction Workers Act, 1996 (BOCW Act)(Regulation of Employment and Conditions of Service) specifies the insurance measures that must be taken by the responsible employers for their laborers in the production and construction enterprise. The Building and Other Construction Workers Welfare Cess Act, 1996, (Cess Act) was established for tax and securing of cess on the ‘cost of construction’ acquired, from the material ‘employer’ to raise the resources for the Building and Other Construction Workers’ Welfare Boards aggregated under the BOCW Act.  

The Labour Cess Act is the law proposing the construction employers to pay 1-2% of their construction cost to the government as tax or levy for the welfare purpose of the workers working under you. This collected tax is utilized for labor insurance in case of accidents, damages, etc., health, education, accommodation, and other unseen plights of laborers around India. Maharashtra was considered to be the state that collected the highest cess revenue, 3558 crores in 5 years.        

Even though both the Acts were established in the country from 1996-97 with the obligation in exertion, the government has utterly failed in practicing and implementing the act following the order of the supreme court.

When is Labour Cess applicable?

Following the guidelines under the Labour Cess Act, all the construction ventures are supposed to register and apply for the Labour Cess tax. The Labour Cess tax applies to any employer governing the building construction having 10 or more employees under a period of 12 months. The construction authority is supposed to register themselves at the registration office in 6 months from the initiation of the construction. This demands 1% of the construction cost be paid.

If the employer doesn’t pay the levy even after the deadline date or pay less than the actual amount, the assessment officer can issue a penalty that he thinks apt for the circumstance. The detailed study about the Labour Cess Act is given here for further research and study purpose.

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