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.
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