Interpretation of the Building and other Construction Workers' Welfare Cess Rules, 1998 in relation to the inclusion of the GST component in determining the cess payable.

JUDGMENT

Prathiba M. Singh, J. (Oral)

1. This hearing has been done through hybrid mode.

2. The question that arises in herein is in respect to constructions contracts, as to the amount on which the 1% cess under the Building and other Construction Workers' Welfare Cess Rules, 1998 (hereinafter 1998 Rules') would be payable.

3. The case of the Petitioner-M/s Girdhari Lal Constructions Pvt. Ltd., who is the contractor in question is, that the GST component cannot be added to the gross value of the work while determining the cess payable, inasmuch as the cess is payable only on the value of the work and not on the GST component. Reliance is placed upon the letter of award dated 21st February 2018,by the NBCC to the Petitioner- Company, in which it is clarified that the GST charged is over and above the basic contract value. The relevant extract of the letter of award is set out below:

"LETTER OF AWARD
xxx

Dear Sir(s),

This is to notify you that your Tender for the work under reference has been accepted. We are pleased to place this Letter of Award (LoA) on you for a total contract value of Rs.847,77,00,000.00 (Rs. Eight Hundred Forty Seven Crores Seventy Seven Lakhs Only) and is inclusive of all taxes, duties, cess, statutory levies and GST. The GST at the time of submission of tender is 12%. In other words Basic Price (BP) will be Rs.756,93,75,000.00 and GST @ 12 % will be Rs.90,83,25,000.00. In case of any change in GST rate, the GST rate will be charged on Basic Price only."

4. Ld. Counsel for the Petitioner also places reliance on Rule 3 of the 1998 Rules, which clearly requires the payment of cess on the cost of construction and not on any other tax or cess related amounts. The said Rule is set out below-

"3. Levy of cess.-For the purpose of levy of cess under sub-section (1) 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 or payable to a worker or his kin under the Workmen's Compensation Act, 1923."

5. On behalf of the NBCC, however, reliance is placed upon the Central Public Works Department's Analysis of Rates for Delhi (Vol- I), 2021 which contains a tabulated example depicting that the cess is payable @ 1% on the total amount including the GST amount.

6. A perusal of the Delhi Building and Other Construction Workers Welfare Board's counter affidavit would show that the Board relies upon Section 15 of the CGST Act to argue that the amount of GST should be calculated on the total amount of cost of construction including the amount of cess.

7. The issue raised in this petition would have an impact on building and construction workers as also the manner in which the cess is payable by the construction industry. It would also include the interpretation of Section 15 of the CGST Act and the CPWD manual as well. Under these circumstances, the following directions are issued.

(1) Let notice be issued to the CPWD through the standing counsel Mr. Anurag Ahluwalia, ld. CGSC who shall seek instructions on behalf of the CPWD as to the interpretation of the manual, which has been referred to above. A short affidavit be filed by the CPWD as to the basis on which the GST is being included prior to determining 1% cess.

(2) Ld. counsel for the Board is not present. Let an intimation be given by the Registry to Mr. Abhay Dixit, ld. Counsel for the Board - Respondent No.2.

(3) Considering the nature of the issues raised, Mr. Zoheb Hossain, ld. Counsel, who is present in court, is appointed as Amicus Curiae to assist the court.

(4) All parties to file their submissions in this matter along with judgements if any, at least one week before the next date of hearing.

8. List on 20th July, 2023.

9. This shall be treated as a part heard matter.