what is labour cess

Labour cess is a levy collected on the cost of construction incurred by employers with a view to augmenting the resources of the Building and Other Constructions Workers Welfare Board. It is a means to provide health and welfare measures for the workers engaged in building and other construction works. The term "cess" is commonly employed to connote a tax with a purpose or a tax allocated to a particular thing. The Building and Other Construction Workers Welfare Cess Act, 1996 empowers the Central Government to notify such rate not exceeding 2% but not less than 1% of the cost of construction incurred by the employer, and accordingly, the Government of India has notified cess at the rate of 1% of the total cost of construction incurred by the employer. The cess is levied on the person who incurs the cost of construction, which is usually the employer or contractor. The Building and Other Construction Workers Welfare Cess Rules, 1998 make it mandatory for deduction of cess payable at the notified rates from the bills paid for the building and other construction work of a government or a public sector undertaking.