Builders in Delhi must pay a higher labour cess.

Builders will now be required to pay more money to the government as a labour cess, which will be used to fund various welfare schemes for labourers.

The Delhi government’s labour department has revised the formula for calculating the cess for the first time since it was imposed in January 2006. The government has collected more than Rs 3,400 crore from various construction activities over the last 16 years.

Surprisingly, the government spent very little money on welfare programmes. Following court orders, it only began providing subsistence grants to construction workers in 2021. So far, the Delhi government has distributed Rs 5,000 to over 5.7 lakh construction workers.

Agencies involved in the construction of private houses, commercial complexes, government buildings, or infrastructure projects costing more than Rs 10 lakh must pay a labour cess of 1% of the total construction cost. Previously, the labour department levied the cess based on rates established by the Central Public Works Department (CPWD) in 2006 or, if higher, the prevailing market rates.

According to officials, the CPWD revised the rates a few times in the last 15 years, the most recent being in 2021, which is more than double the rates in 2006. The labour department will now use this as the basis for calculating the cess.

“The cess will provide financial assistance to real estate workers.” However, authorities must ensure that the money collected is spent properly and promptly for their benefit,” TimesView writes.

According to a senior labour department official, the Delhi government should have revised the assessment rates on a regular basis. “It’s not like we’ve been calculating construction costs based on 2006 rates for the past several years.” Our previous order states unequivocally that the agencies must pay the cess at current market rates, unless they are higher. “The cess must have been paid at the market rate by all government agencies,” the official added.

The official did admit, however, that private constructions may have under-estimated construction costs and paid cess based on older rates. “We have asked our officials to look into whether private players are paying less cess.” The government, on the other hand, commissions the vast majority of constructions in Delhi. “Nearly 80% of our cess collection comes from government projects,” the official added.

The government receives approximately Rs 250 crore per year from labour cess. The Delhi Building and Other Construction Workers Welfare Board has about 8.5 lakh registered construction workers.