Draft code on Social Security 2020 cuts interest on late labour cess payment

As per the Building and Other Construction Workers’ Welfare Cess Act, 1996 the construction industry is required to pay 1% of the construction cost of a project as labour cess within 30 days of the completion of the project.

File photo
File photo

JAIPUR: Reacting to the draft rules under the Code on Social Security, 2020 circulated by the Union labour and employment ministry for seeking stakeholders’ feedback last week, the construction industry in the state said the proposal to reduce interest rate on delayed labour cess payment to 1% per month from 2% will not be enough to resolve the past cases.

Recently, the industry has been slapped notices worth over Rs 1,000 crore to clear cess dues going back to 2009, when the provision was introduced. As per the Building and Other Construction Workers’ Welfare Cess Act, 1996, which came into effect in the state in 2009, the construction industry is required to pay 1% of the construction cost of a project as labour cess within 30 days of the completion of the project. Failure to pay the cess attracts an annual interest penalty of 24%.

But representatives of the industry said the government did not actively pursue collection of the cess till 2015 and the construction companies were unaware of the liability. As the government became active, the new projects started paying it. But there are many old cases where the payments have not been made to the department.

“The Union labour ministry has recognized that monthly interest of 2% on the delayed payment is too high and rightfully reduced it to 1%. But these cases are so old that the cumulative interest will be very high. Currently, the industry is passing through one of the tough times. Keeping this in view, the state government should introduce an amnesty scheme so that all the pending cases get cleared and also the state will be able to get funds at a time when the tax revenues have decreased,” said Anand Mishra, a leading builder in the city.

In fact, CII-Rajasthan had drawn the attention of the government to the high interest amount. IT had proposed the industry department to take up the issue at the appropriate level and convince the government to reduce interest penalty to levels of prevailing bank rates.

Industry representatives said that construction projects also involved joint ventures and after the completion of the projects, the partnerships have also ceased. “In these cases, it is very difficult to convince the partner to pay the past dues,” said a builder.

Any construction, whose value is Rs 10 lakh is liable to pay the labour cess and it includes, residential projects, commercial buildings, hotels, hospitals, company buildings and individual houses. Recently, the government has also taken contractors in to the ambit of the liability. However, it is not easy to recover the money from people who have built houses worth over Rs 10 lakh.