Dear Sir,
Could anyone help me with whether Labour Cess is applicable on free issue material provided by the Principal Contractor? Company "A" is constructing a factory for Company "B". Company "A" is providing cement and steel to Company "B" as free issue material. The value of the free issue material is also not included in the Bill of Quantities (BOQ). As per our BOQ, we raise proper bills on a regular basis, and they deduct Building and Other Construction Workers' (BOCW) Cess on work done. However, in the final settlement, they are stating that BOCW Cess on free issue material should also be imposed on Company "B".
Total Work Order Value - 71 Cr. (Excluded Free Issue Material)
Total Work Done Value - 71 Cr. (Excluded Free Issue Material)
Total Labor Cess Deducted Value - 0.71 Cr. (Excluded Free Issue Material)
Free Issue Material Value - 47 Cr.
They are deducting Rs. 0.47 Cr. as BOCW Cess on Free Issue Material.
Is this correct because that is not our cost of construction?
Vinay
From India, Delhi
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Could anyone help me with whether Labour Cess is applicable on free issue material provided by the Principal Contractor? Company "A" is constructing a factory for Company "B". Company "A" is providing cement and steel to Company "B" as free issue material. The value of the free issue material is also not included in the Bill of Quantities (BOQ). As per our BOQ, we raise proper bills on a regular basis, and they deduct Building and Other Construction Workers' (BOCW) Cess on work done. However, in the final settlement, they are stating that BOCW Cess on free issue material should also be imposed on Company "B".
Total Work Order Value - 71 Cr. (Excluded Free Issue Material)
Total Work Done Value - 71 Cr. (Excluded Free Issue Material)
Total Labor Cess Deducted Value - 0.71 Cr. (Excluded Free Issue Material)
Free Issue Material Value - 47 Cr.
They are deducting Rs. 0.47 Cr. as BOCW Cess on Free Issue Material.
Is this correct because that is not our cost of construction?
Vinay
From India, Delhi
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Dear Mr. Tripathi,
The deducted cess on FIM is correct. There is no ambiguity. The total cost of construction would be inclusive of 47 Crores if it was not supplied by A. There is no exemption if the cost of material is supplied by the Client. Only the cost of land and compensation paid or to be paid to workers under the WC Act can be deducted from the Cess Amount. The only impact would be on the cess amount. It would be less if the client is able to procure material at a lower cost than the contractor. So, 1% charged on it would be lesser than if the material is bought through the contractor. But even in that case, the assessing officer can see through under-invoicing or costing. Then they will ask for higher cess with the appropriate higher cost charged for the material. I guess in this case your company is benefited with less cess.
From India, Mumbai
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14The deducted cess on FIM is correct. There is no ambiguity. The total cost of construction would be inclusive of 47 Crores if it was not supplied by A. There is no exemption if the cost of material is supplied by the Client. Only the cost of land and compensation paid or to be paid to workers under the WC Act can be deducted from the Cess Amount. The only impact would be on the cess amount. It would be less if the client is able to procure material at a lower cost than the contractor. So, 1% charged on it would be lesser than if the material is bought through the contractor. But even in that case, the assessing officer can see through under-invoicing or costing. Then they will ask for higher cess with the appropriate higher cost charged for the material. I guess in this case your company is benefited with less cess.
From India, Mumbai
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