• Worker welfare cess to be paid by builder or by flat owner

The Builder has sent us a notice stating that Worker Welfare Cess would form a part of our final demand letters.
The Builder has referred to a notification received from Maharashtra Chamber of Housing Industry (MCHI) in this regard.
The MCHI (Maharashtra Chamber Of Housing) letter dated November 2, 2011 states “Payment of 1% of Construction Contract Value as Labour Welfare Cess” which is Applicable from 01.07.2010 and cites the following acts “The Building and Other Construction Worker’s Regulation of Employment and Conditions of Service ) Act, 1996” and “Maharashtra Building and Other Construction Workers’ (Regulation of Employment and Conditions of Service) Rules, 2007”. 

The Builder is saying that since in the agreement, we have agreed to bear and pay any such levies imposed by the concerned local authority and / or Government and/or other public authority, so the cess needs to be paid by us.

I need to know whether:
a.	Whether letter from MCHI has any legal validity in terms of Rules framed by local authority/Government?
b.	Whether MCHI can be termed a public Authority?
c.	The said letter does not specifically state that the Cess has to be collected from the Flat Owner, so can the Builder interpret the term “1% of Construction Cost” as to be collected from the Flat owner.
d.	Whether the payment of Worker Welfare Cess by the builder can be passed onto the Flat Owners?
Asked 1 year ago in Property Law from Thane, Maharashtra
1) the Maharashtra Chamber of Housing Industry (MCHI-CREDAI), formed in 1982, is the most prominent and the only recognized body of Real Estate Developers in Mumbai and MMR. the letter is basically for information of members regarding payment of labour  cess 

2) The rules formulated in accordance with the Building and Other Construction Workers’ Welfare Cess Act, 1996, mandate the corporation to collect the cess of one per cent over the estimated cost of construction from the builders, when they approach for plan approvals.

, 3) the applications should be accompanied by a crossed demand draft in favour of the Building and Other Construction Workers’ Welfare Board, for one per cent cess on the estimated cost of construction for the total project or for the period of one year.


4) The Labour Welfare Cess is being collected by the government for providing welfare to unskilled workers. It is supposed to be 1% of the construction cost levied on the builder.

5) it is liability of builder to pay this tax for welfare to his labourer, 

6) in your case your agreement mentions that you would be liable to pay such levies imposed by the concerned local authority and / or Government and/or other public authority


7) hence the builder is seeking to recover the amount of cess from you . 

8) in the event builder fails to pay the cess it would be recovered from the flat owners . 

9) you can pay the amount under protest take possession of flat and then move consumer forum  against the builder and seek  refund as it is basically liability on the builder
Ajay Sethi
Advocate, Mumbai
23195 Answers
1218 Consultations
5.0 on 5.0
1. As the clause is already mentioned in the Builder Buyer Agreement for any future taxes of the government to be paid by the buyer you would need to pay the amount - even though this  is developers responsibility.

2. It is suggested to pay the levid amount - once you get the possession of the house and if you wish you can claim a refund through consumer forum.
Atulay Nehra
Advocate, Noida
434 Answers
15 Consultations
4.7 on 5.0
1. “Payment of 1% of Construction Contract Value as Labour Welfare Cess”  is required to be made by the builder,

2. You have signed the agreement wherein you have "agreed to bear and pay any such levies imposed by the concerned local authority and / or Government and/or other public authority",

3. You can very well contest that you have agreed to pay the levies imposed by the Govt. on the buyer and not on the builder,

4. Pay the amount under protest and take possession of the flat and get the deed registered,

5. After that file a consumer case claiming back the said amount with interest, damage and cost,

6. It is a very good case to win.
Krishna Kishore Ganguly
Advocate, Kolkata
12104 Answers
229 Consultations
5.0 on 5.0
1. It is the builder who is liable to pay 1% of Construction Contract Value towards Labour Welfare Cess. This is a liability which cannot be passed to the buyer except by an agreement to the contrary.

2. In your agreement you have agreed to bear and pay any such levies imposed by the concerned local authority and/or Government and/or other public authority. However, it does not include the levies which are to be paid by the builder.

3. Refuse to pay the cess. Move the consumer forum to recover the possession of the flat.
Ashish Davessar
Advocate, Jaipur
18088 Answers
448 Consultations
5.0 on 5.0
1) worker cess is levied on construction cost of the builder and not at price at which builder sells you the flat . 

2) rule 3 of the Building and Other Construction Workers Welfare Cess Act, 1998 where the cost of construction is stated as: 
"3. Levy of Cess—For the purpose of levy of cess under sub-section(l) of section 3 of the Act, cost of construction shall include all expenditure incurred by an employer in connection with the building or other construction work but shall not include :-
—cost of land;


—any compensation paid of payable to a worker or his kin under the Workmen's Compensation Act '1923.
Ajay Sethi
Advocate, Mumbai
23195 Answers
1218 Consultations
5.0 on 5.0
1. Write a letter to the builder asking for  break up of the said Cess amount to be paid. State clearly that you are paying it under protest since this amount is supposed to be paid by the builder,

2. Insist that the DD will be made dran on  the authority collecting Labour Welfare Cess and will be paid directly,

3. It is coming to Rs.35 K flat,

4. After taking possession of the flat and getting it registered in your name, file the consumer case as advised in my earlier post.
Krishna Kishore Ganguly
Advocate, Kolkata
12104 Answers
229 Consultations
5.0 on 5.0

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