Cess Applies Only to Houses Above ₹50 Lakh Under New Labour Codes

As per the Labour Code passed by the Central Government, the new rule applies to those who received their building permit on or after the 21st of this month.

With the implementation of the Central Government’s Labour Codes, only those constructing houses costing more than ₹50 lakh are now required to pay the construction cess. The legislation stipulates that cess must be paid as a percentage of the construction cost, which is assessed using the plinth area.

 Earlier, cess was applicable for buildings with a construction cost exceeding ₹10 lakh or with a plinth area above 100 sq. m (1077 sq. ft). With the new code coming into effect on the 21st, the construction cost threshold has been raised. The building permit document will be the main reference for determining the cess liability. Therefore, only those who obtain permits after the 21st will fall under the revised rule. Additional guidance from the State Labour Department is anticipated shortly.  Among the four Labour Codes, Section 2(6) of the Social Security Code specifies the criteria for determining the cess on houses. State governments are allowed to increase the ₹50 lakh threshold for cess, but cannot reduce it under the law. For commercial projects, the existing rule continues, requiring payment of the prescribed cess irrespective of construction or renovation expenses.

Major Setback for the Labour Department

Raising the construction cost threshold for collecting cess will be a major setback for the Labour Department. The Building and Other Construction Workers’ Welfare Board currently collects this cess, and nearly 70% of its revenue comes from residential buildings. Most of this amount is allocated for workers’ pensions.

The Board’s monthly pension of ₹1,600 has been pending for the last 17 months. A total of ₹1,163 crore in pensions and other benefits is overdue for 3.8 lakh workers, of which unpaid pension alone amounts to ₹1,000 crore.