Currently, the law governing social security for building and other construction workers is the Building and Other Construction Workers’ Welfare Cess Act, 1996, often termed the BoCW Cess Act. It levies a cess on the employer in relation to building and other construction work that is calculated on the basis of the cost of construction. Under Section-3(1) of the BoCW Cess Act the limits for the rate of cess are fixed between one and two per-cent of the cost of construction incurred by an employer. The same would be assessed on the basis of an annual return that must be submitted in Form-XIV on the Shram Suvidha Portal. Due to the onset of COVID-19 the return under the BoCW Cess Act was made part of Unified Online Annual Returns for the year 2019.
In this manner, the cess shall be paid by the employer within thirty days of completion of the construction project or within thirty days of the date on which the assessment of cess payable is finalized, whichever is earlier. Where the project exceeds one year, cess shall be paid within thirty days of completion of one year from the date of commencement of work and every year thereafter, at the notified rates on the cost of construction incurred during the relevant period. The amount collected shall be transferred to the Building and Other Construction Workers Cess Board within thirty days of its collection.
The above is a general overview of the manner in which BoCW Cess is paid based on the Central rules pertaining to the same. We shall now compare the scheme provided in the BoCW Cess Act to that under Chapter-VIII of the Code on Social Security, 2020 read with the draft Central Rules for the same, to understand the changes that have been brought about.
Definition of Building and Other Construction Work
The landmark judgement of the Supreme Court in the case of Lanco Anpara Power Limited v State of Uttar Pradesh rendered in 2016 cleared the air with regards to the applicability of the BoCW Act to premises which are registered under the Factories Act, 1948. The Apex court held that workers constructing a factory would not be understood as workers within Section-2(l) of the Factories Act and would not be entitled to the benefits therein. The court adopted a purposive interpretation and held that establishments under the Factories Act employing construction workers in the construction of factory premises would not fall under the exclusion provided under the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.
Thus, the Court held that BoCW Act is applicable to those establishments registered under the Factories Act wherein construction work is being undertaken. However, the question of responsibility of payment of BoCW cess was left open, especially in cases wherein sub-contractors are employed.
These defects have been remedied under the Code on Social Security, 2020 as the definition of building or other construction work under Section-2(6) clearly states that building or other construction work related to any factory or mine is excluded. It also excludes residential construction the total cost of work in which does not exceed fifty lakhs or such higher amount employing such number of workers as may be notified.
Levy, Collection and Self-Assessment of BoCW Cess
Section-100 and 103 of the Code read with Rule-43 under the draft Central Rules provide for the manner and time of collection of cess as well as the manner of deposit of the cess. Additionally, the above also provide for the uniform rate of advance cess and manner of self-assessment of cess. These procedures can be summarized as follows:-
1. Every employer must furnish information in Form-XV to the assessing officer within sixty days of commencement of his work or payment of cess, as the case may be. Any change in the above information shall be communicated to the Assessing Officer in Form-XV not later than thirty days from the date when the modification or change is affected
2. The cess shall be paid in advance by the employer on the basis of a self-assessment duly certified by the Chartered Engineer at the time of approval or before the commencement of work. For the purpose of self-assessment of cost of construction, the employer shall calculate the cost of construction work on the uniform rate/rates as specified by the respective State’s Public Works Department or Central Public Works Department or as per return/document submitted to the Real Estate Regulatory Authority (RERA), applicable for that particular year in which commencement of building and other construction work took place. This must be submitted in Form-XVI.
3. In case the construction activity of such a type for which neither State PWD nor Central PWD or RERA has specified any rate, the employer shall calculate the cost of construction, based on the documents to be produced by him along with his assessment statement in Form-XVI within 60 days on completion of his work to the assessing officer
4. In the event of stoppage or reduction of building or construction work, the employer shall furnish the information in Form-XVII to the assessing officer within sixty days of such stoppage or reduction.
5. Every employer must, on the completion of building or other construction work, submit a return in Form-XVIII to the assessing officer within 60 days of each of his completed work
6. The assessing officer on receipt of information of return and cess paid in Form-XVIII from an employer shall make a scrutiny of such information furnished and if satisfied of its correctness shall make an order of assessment within a period not exceeding 90 days from the date of receipt of the same, indicating the amount of cess payable by the employer and endorse a copy thereof to the employer.
7. Where the employer has deposited the cess in advance and they decide to withdraw from or foreclose the work or modify the construction plan thereby reducing the cost undertaken or call off the work due to other circumstances, the employer may seek refund of excess amount of cess paid by submitting information in Form-XVII to the assessing officer.
8. In case the assessing officer is of the opinion that the employer has under-calculated or miscalculated the cost of construction or has under-calculated the amount of cess payable, he shall issue notice to the employer for assessment of the cess.
The exclusion of construction work related to factories from the definition of building and other construction work as well as the inclusion of a self-assessment scheme have remedied some of the largest problems that existed with respect to social security for this class of workers. Furthermore, the introduction of advance payment of cess will be beneficial in terms of ensuring that the social security benefits reach the workers on time. Overall, the scheme provided under the Code on Social Security, 2020 and its draft Central Rules are a step in the right direction.
What are your thoughts on the reformed scheme for BoCW cess? Do you believe any additional reforms can be introduced? Do you have any doubts with regards to compliance under the reformed scheme?
Drop your thoughts and queries in the comments below.
|Disclaimer: This blog is meant for informational purposes and discussion only. It contains only general information about legal matters. The information provided is not legal advice and should not be acted upon without seeking proper legal advice from a practicing attorney.|
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6 thoughts on “Social Security for Building and Other Construction Workers (BOCW)”
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In an EPC contract ,who will be the principal employer as per BOCW act/CLRA as there are some responsibilities lies with principal employer.in one case the EPC contractor is subletting all the works to specialized vendors and they are not deploying any labours directly.in this case who is principal employer who has to issue forms for labour license ?
The BOCW Act Section 2 (i) states that: “employer” in relation to an establishment, means the owner thereof, and includes, (i) In relation to a building or other construction work carried on by or under the authority of any department of the Government, directly without any contractor, the authority specified in this behalf, or where no authority is specified, the head of the department; (ii) in relation to a building or other construction work carried on by or on behalf of a local authority or other establishment, directly without any contractor, the chief executive officer of that authority or establishment; (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;
Whereas, under section 2 (g) of the Contract Labour (Regulation And Abolition) Act, 1970 “principal employer” means: (i) in relation to any office or department of the Government or a local authority, the head of that office or department or such other officer as the Government or the local authority, as the case may be, may specify in this behalf, (ii) in a factory, the owner or occupier of the factory and where a person has been named as the manager of the factory under the Factories Act, 1948 (63 of 1948) the person so named, (iii) in a mine, the owner or agent of the mine and where a person has been named as the manager of the mine, the person so named, (iv) in any other establishment, any person responsible for the supervision and control of the establishment.
Section 12 of the Contract Labour (Regulation And Abolition) Act, 1970 requires that no contractor to whom this Act applies, shall undertake or execute any work through contract labour except under and in accordance with a licence issued in that behalf by the licensing officer.
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In a contract where no civil construction is there , only supply and installation of equipment’s will BOCW cess be applicable and if yes whether only the portion done at site i.e Installation value only or on the whole contract value of supply and installation. What are the legal cases supporting this
The Building & Other Construction Workers’ Welfare Cess [BOCW Cess] is levied on the total cost of construction (i.e. the cost comprising of both the materials [supply] and the labour [service] portion). ‘Cost of Construction’ has been defined in Rule 3 of the Cess Rules to include ‘all expenditure incurred by an employer in connection with the building or other construction work’ with the exclusion of i) cost of land, and ii) any compensation paid or payable to a worker or his kin under the Workmen’s Compensation Act, 1923.
As stated above, the exception clauses relating to cost of construction as provided in Section 3 of BOCW Cess Act and Rule 3 of the BOCW Cess Rules clearly indicate that there was no intention of the statute to exclude the cost of supply part. Thus, the Building & Other Construction Workers’ Welfare Cess [BOCW Cess] is applicable on the total contract price and thus such Cess is levied on both the materials [supply] and the labour [service] portion.