Cess Fund For Welfare Of Construction Workers – Economics

Table of Contents

CURRENT AFFAIR

Recently, the Ministry of Labour & Employment has issued an advisory to all States/UTs to use the Cess Fund for Welfare of Construction Workers.

DETAILS

The advisory comes under Section 60 of the Building and Other Construction Workers (BOCW) Act, 1996.
The Act regulates the employment and conditions of service of building and other construction workers.
It provides for their safety, health and welfare measures and for other matters connected therewith or incidental thereto.
All State Governments/UTs have been advised to transfer funds from the Cess Fund to the account of construction workers through Direct Benefit Transfer (DBT) mode.
The amount to be granted to construction workers may be decided by the respective state governments and Union territories.
The financial assistance at this point in time would help to mitigate the financial crisis of construction workers to some extent and boost their morale to deal with COVID-19.

CESS FUND

The BOCW Cess Act, 1996, provides for the levy and collection of cess at 1-2 % of the cost of construction, as the Central government may notify.
The cess has been levied at the rate of 1% of the cost of construction, as notified by the Central government in its official gazette.
The cess is collected by the State governments and UTs.
It is utilised for the welfare of building and other construction workers by the respective State Building and Other Construction Workers Welfare Boards.

CESS

Cess is a form of tax levied over and above the base tax liability of a taxpayer.
Cess is resorted to only when there is a need to meet the particular expenditure for public welfare.
Cess is not a permanent source of revenue for the government, and it is discontinued when the purpose of levying it is fulfilled.
It can be levied on both indirect and direct taxes.
Examples :
Swachh Bharat Cess: Introduced in 2015, a 0.5% Swachh Bharat cess was imposed to fund a national campaign for clearing the roads, streets and the infrastructure of India.
Infrastructure Cess: Announced in Union Budget 2016, this cess was charged on the production of vehicles.
Cess is a tax on tax, levied by the govt for a specific purpose. Generally, cess is expected to be levied till the time the govt gets enough money for that purpose. Eg. The education cess is meant to finance basic education in the country.
Surcharge is an additional burden to the tax being already levied. Generally, surcharge is levied for a certain period time. For instance, the 15% surcharge being levied on super rich (HNIs) in India for one financial year.
Difference is in the way of charging.
For instance, say some tax is 30%, so out of Rs 100 earning, Rs 30 is paid as tax. Now if the govt levies a 10% cess, the total tax will become Rs 33 (30+10% of 30). However, if the govt levies a 10% surcharge, the total tax will become Rs 40.
Another difference is that while surcharge goes to consolidated fund of India and can be used for any purpose, a cess is earmarked for a particular purpose only and goes to Public Account.
Cess is imposed on total amount of taxes and surcharge taking together. For example education cess is calculated at the rate of three per cent on income-tax and surcharge. So cess is calculated later than surcharge.