Building and other construction workers welfare cess act 1996

This query is : Resolved

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A discussion on liability for the 1% cess under the Building and Other Construction Workers Welfare Cess Act, 1996. The company, as employer, has the statutory obligation to pay the cess, but contracts often pass the cost to the contractor. Whether the contractor can charge it separately depends on the tender or contract terms.

abhijit majumder

abhijit majumder (Querist)
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08 July 2026 Sir,
The company engaged contractor by inviting tender for some construction work.
For building construction work the employer have to collect and pay cess under 'building and other construction workers welfare cess act 1996'.
The cess was charged on cost of construction.
My queries are:
Who are liable to collect the cess ie Company or the Contractor?
The Contractor while making invoice to the company charge and added/showed separately cess (1%) over cost of construction. Is it correct or the contractor collect excess cess?
Regards
Abhijit

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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08 July 2026 The primary statutory liability to pay the 1% cess falls squarely on the Employer (the Company), but it is legally and standardly passed down to the Contractor via commercial terms. Whether the contractor can charge it separately depends entirely on your specific tender or contract agreement.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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08 July 2026 Higher courts, including the Delhi High Court and the Supreme Court, have ruled that while the ultimate statutory obligation belongs to the owner/company, the financial burden of the cess is routinely passed on to the contractor.
Locate the Taxes and Duties clause in your original tender document to see if rates were fixed as "all-inclusive".
Ask the contractor to provide their BOCW challan or registration receipt to prove they are actively depositing this collected money to the State Labour Welfare Board.
If your contract is silent, it is safest for the Company to deduct the 1% directly from the contractor's gross bill and remit it to the government repository themselves to stay perfectly compliant.

abhijit majumder

abhijit majumder (Querist)
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09 July 2026 Thanks to Sir Dhirajlal Rambhia for sharing your valuable comments. Tender clause states the quotation include tax duty cess etc.
Regards
Abhijit

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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09 July 2026 So the liability is sifted to contractor. Just procure the copy of cess deposited, from the contractor for your future security.

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