Skip to content
Chheda ConsultantsChheda ConsultantsSince 1972 · Labour law & payroll

Chapter VIII · Social Security Code

Social Security and Cess for Building and Other Construction Workers

This chapter makes employers carrying out building or other construction work pay a welfare cess of 1% to 2% of the cost of construction, at the rate the Central Government notifies, and sets out how that cess is collected, self-assessed, charged interest on, penalised and appealed. It also decides which construction workers get registered as beneficiaries of the State Building Workers' Welfare Board, and how the money in the welfare fund may be spent. It matters to builders and contractors because the cess is a direct cost on covered projects (the Code's definition of building or other construction work leaves out, among others, work related to a factory or mine, work employing fewer than ten workers, and an individual's own home costing up to Rs. 50 lakh), and to workers because registration is what gives them access to the Board's benefits.

9 sections ~6 min read Official text, PDF pp. 65–67
Builders and real-estate developersConstruction contractorsProject finance and compliance teamsConstruction workers

Key points

  1. 1Every employer doing building or other construction work pays a cess of between 1% and 2% of the cost of construction, at the rate the Central Government notifies; land cost and any compensation paid or payable to an employee or his kin under Chapter VII are left out of that cost. §100
  2. 2Cess can be collected up front, in the manner the Central Government prescribes: deducted at source on government and public sector undertaking projects, or collected in advance through the local authority where building approval is needed, and it may be charged at uniform rates prescribed on the basis of the quantum of work, subject to final assessment. §100
  3. 3Within 60 days of completing each project (or the period the Central Government notifies), the employer works out the cess on a self-assessment, pays the balance after adjusting advance cess, and files a return; the officer can reassess if the figures do not match. §103
  4. 4Paying late attracts interest, at the rate the Central Government prescribes, from the due date until the day of payment, and cess still unpaid after the date in an assessment order becomes arrears, with a possible penalty of up to the amount of the cess. §101§104
  5. 5A building worker aged 18 or over but under 60 who has done at least 90 days of construction work in the preceding 12 months is registered as a beneficiary by an officer authorised by the Welfare Board, and stops being one on reaching 60 or when not engaged in construction work for at least 90 days in a year. §106§107
  6. 6Cess is credited to the Building and Other Construction Workers' Welfare Fund, and a Board cannot spend more than 5% of its total expenses in a financial year on salaries and other administrative expenses. §108

At a glance

1% to 2% (as notified)Cess rate on cost of constructionSection 10060 days (or as notified)Time to self-assess and pay cess after completing a projectSection 103Up to the amount of cessMaximum penalty for unpaid assessed cessSection 10418 or over, under 60Age band for registration as a beneficiarySection 10690 daysConstruction work needed in the last 12 months to registerSection 1065% of total expenses in the financial yearCap on a Board's salary and administrative spendingSection 108
Earlier law:Building and Other Construction Workers' Welfare Cess Act, 1996Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996
100

Levy and collection of cess

In plain words

Every employer doing building or other construction work pays a welfare cess of 1% to 2% of the cost of construction (excluding land cost and employee compensation under Chapter VII), at the rate the Central Government notifies. It is collected in the manner the Central Government prescribes, including deduction at source on government and public sector undertaking work and advance collection through the local authority at the approval stage, may be charged at uniform prescribed rates based on the quantum of work subject to final assessment, and is deposited with the Building Workers' Welfare Board.

(1)

There shall be levied and collected a cess for the purposes of social security and welfare of building workers at such rate not exceeding two per cent. but not less than one per cent. of the cost of construction incurred by an employer, as the Central Government may, by notification, from time to time, specify.

Explanation

Explanation.—For the purposes of this sub-section, the cost of construction shall not include,—

(a)

the cost of land; and

(b)

any compensation paid or payable to an employee or his kin under Chapter VII.

(2)

The cess levied under sub-section (1) shall be collected from every employer undertaking building or other construction work in such manner and at such time, including deduction at source in relation to a building or other construction work of a Government or of a public sector undertaking or advance collection through a local authority where an approval of such building or other construction work by such local authority or such other authority notified by the State Government is required, as may be prescribed by the Central Government.

(3)

The proceeds of the cess collected under sub-section (2) shall be deposited by the local authority or such other authority notified by the State Government to the Building Workers' Welfare Board in such manner as may be prescribed by the Central Government.

(4)

Notwithstanding anything contained in sub-section (1) or sub-section (2), the cess leviable under this Chapter including payment of such cess in advance may, subject to final assessment to be made, be collected at a uniform rate or rates as may be prescribed by the Central Government on the basis of the quantum of the building or other construction work involved.

Source: The Code on Social Security, 2020, official gazette copy, page 65
101

Interest payable on delay in payment of cess

In plain words

An employer who does not pay cess within the time the appropriate Government prescribes pays interest, at a rate the Central Government prescribes, for the whole period from the due date until the day it is actually paid.

If any employer fails to pay any amount of cess payable under section 100 within such time as may be prescribed by the appropriate Government, such employer shall be liable to pay interest at such rate as may be prescribed by the Central Government, on the amount of cess, to be paid, for the period from the date on which such payment is due till such amount is actually paid.

Source: The Code on Social Security, 2020, official gazette copy, page 65
102

Power to exempt from cess

In plain words

The appropriate Government can, by notification, exempt an employer or a class of employers in a State from this cess where such cess is already levied and payable under a corresponding law in force in that State.

Notwithstanding anything contained in this Chapter, the appropriate Government may, by notification, exempt any employer or class of employers in a State from the payment of cess payable under this Chapter where such cess is already levied and payable under any corresponding law in force in that State.

Source: The Code on Social Security, 2020, official gazette copy, page 65
103

Self-assessment of cess

In plain words

Within 60 days of finishing each building or construction project (or a period the Central Government notifies), the employer self-assesses the cess on the cost of construction, pays it after adjusting advance cess, and files a return; if the officer finds a mismatch, they inquire and pass an assessment order with a date for payment.

(1)

The employer shall, within sixty days or such period as may be notified by the Central Government of the completion of his each building and other construction work, pay such cess (adjusting the advance cess already paid under section 100) payable under this Chapter on the basis of his self-assessment on the cost of construction worked out on the basis of the documents and in the manner prescribed by the Central Government and after such payment of cess, he shall file a return under clause (d) of section 123.

(2)

If the officer or the authority to whom or to which the return has been filed under sub-section (1) finds any discrepancy in the payment under the self-assessment and the payment required under the return referred to in that sub-section, then, he or it shall, after making or causing to be made such inquiry as he or it thinks fit and after such inquiry make the appropriate assessment order.

(3)

An order of assessment made under sub-section (2) shall specify the date within which the cess shall be paid by the employer, if any.

Source: The Code on Social Security, 2020, official gazette copy, page 66
104

Penalty for non-payment of cess within the specified time

In plain words

Cess not paid by the date in an assessment order becomes arrears, and the prescribed authority can impose a penalty of up to the amount of cess, but only after hearing the employer, and not at all if the default had a good and sufficient reason.

If any amount of cess payable by any employer under section 103 is not paid within the date specified in the order of assessment made under sub-section (2) of that section, it shall be deemed to be in arrears and the authority prescribed by the Central Government in this behalf may, after making such inquiry as it deems fit, impose on such employer a penalty not exceeding the amount of cess:

Proviso

Provided that, before imposing any such penalty, such employer shall be given a reasonable opportunity of being heard and if after such hearing the said authority is satisfied that the default was for any good and sufficient reason, no penalty shall be imposed under this section.

Source: The Code on Social Security, 2020, official gazette copy, page 66
105

Appeal to appellate authority

In plain words

An employer can appeal an assessment order or a penalty order to the appellate authority within the time the Central Government prescribes and with the fee the appropriate Government prescribes; the authority hears the employer and decides as quickly as possible, and the Code makes the appeal order final, saying it cannot be called in question in any court of law.

(1)

Any employer aggrieved by an order of assessment made under section 103 or by an order imposing penalty made under section 104 may, within such time as may be prescribed by the Central Government, appeal to such appellate authority in such form and in such manner as may be prescribed by the Central Government.

(2)

Every appeal preferred under sub-section (1) shall be accompanied by such fees as may be prescribed by the appropriate Government.

(3)

After the receipt of any appeal under sub-section (1), the appellate authority shall, after giving the appellant an opportunity of being heard in the matter, dispose of the appeal as expeditiously as possible.

(4)

Every order passed in appeal under this section shall be final and shall not be called in question in any court of law.

Source: The Code on Social Security, 2020, official gazette copy, page 66
106

Registration of building workers as beneficiaries

In plain words

Every building worker aged 18 or over but under 60 who has done at least 90 days of building or construction work in the preceding 12 months is registered as a beneficiary by the officer authorised by the Building Workers' Welfare Board, in the manner the Central Government prescribes.

Every building worker who has completed eighteen years of age, but has not completed sixty years of age, and who has been engaged in any building or other construction work for not less than ninety days during the preceding twelve months shall be registered by the officer authorised by the Building Workers' Welfare Board as a beneficiary under this Chapter in such manner as may be prescribed by the Central Government.

Source: The Code on Social Security, 2020, official gazette copy, page 66
107

Cessation as a beneficiary

In plain words

A registered worker stops being a beneficiary on reaching 60 or when not engaged in construction work for at least 90 days in a year (absence due to an injury from an accident at work is left out of that count), but someone who was a beneficiary for at least three years continuously immediately before turning 60 stays eligible for the benefits the Central Government prescribes; time with another State's Board immediately before joining the current Board counts towards the three years.

(1)

A building worker who has been registered as a beneficiary under section 106 shall cease to be as such when he attains the age of sixty years or when he is not engaged in building or other construction work for not less than ninety days in a year:

Proviso

Provided that in computing the period of ninety days under this sub-section, there shall be excluded any period of absence from the building or other construction work due to any personal injury caused to the building worker by accident arising out of and in the course of his employment.

(2)

Notwithstanding anything contained in sub-section (1), if a person had been a beneficiary for at least three years continuously immediately before attaining the age of sixty years, then, he shall be eligible to get such benefits as may be prescribed by the Central Government.

Explanation

Explanation.—For computing the period of three years under this sub-section as a beneficiary registered with a Building Workers' Welfare Board, there shall be added any period for which a person had been a beneficiary registered with any other such Board immediately before his registration with the Building Workers' Welfare Board.

Source: The Code on Social Security, 2020, official gazette copy, page 66
108

Building and Other Construction Workers’ Welfare Fund and its application

In plain words

Each Welfare Board keeps a Building and Other Construction Workers' Welfare Fund made up of the cess, Central Government grants and loans, and sums from other sources the Central Government decides, and uses it for its functions under section 7(6), staff costs and purposes allowed by the Code, with salaries and other administrative expenses capped at 5% of its total expenses in a financial year.

(1)

There shall be constituted by a Building Workers' Welfare Board a fund to be called the Building and Other Construction Workers' Welfare Fund and there shall be credited thereto—

(a)

the amount of any cess levied under sub-section (1) of section 100;

(b)

any grants and loans made to the Building Workers' Welfare Board by the Central Government; and

(c)

all sums received by the Building Workers' Welfare Board from such other sources as may be decided by the Central Government.

(2)

The Building and Other Construction Workers' Welfare Fund shall be applied for meeting—

(a)

expenses of the Building Workers' Welfare Board in the discharge of its functions under sub-section (6) of section 7;

(b)

salaries, allowances and other remuneration of the members, officers and other employees of the Building Workers' Welfare Board; and

(c)

expenses on objects and for purposes authorised by this Code.

(3)

No Building Workers' Welfare Board shall, in any financial year, incur expenses towards salaries, allowances and other remuneration to its members, officers and other employees and for meeting the other administrative expenses exceeding five per cent. of its total expenses during that financial year.

Source: The Code on Social Security, 2020, official gazette copy, page 67

What does this mean for your company?

We will tell you, in one call.

Ask on WhatsAppSend an enquiry
Call WhatsApp Enquire