RGGVY projects to pay 1% cess

The one percent cess levied on the construction activities by the Orissa government as per the provisions of the building and other construction workers’ welfare act, 1996, would be applicable to the projects taken up under the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). It will be included in the project cost of the works taken up under the scheme.

The decision to include the cess in the RGGVY project cost follows the clarification issued by the Union ministry of power to the state government recently. The state government, on its part, has communicated to the Central Public Sector Undertakings (CPSUs) vested with the work in Orissa to include the cess while calculating the cost of the RGGVY projects, sources said.

Collection of cess from these works is likely to boost the revenue yield from this sector. It may be noted the state government is facing legal hurdles in the collection this cess as some private companies and contractors have moved to Orissa High Court against its imposition.

Similarly, non-collection of the cess at the source by various government departments and development authorities is also contributing to the poor collection on this front. The Orissa government targeted to raise about Rs 100 crore as cess on the cost of the construction incurred by an employer or builder during the current fiscal.

“The government departments and the development authorities are not deducting the cess at source resulting in poor collection”, a senior official of the state labour and employment department said.

To make the matters worse, Dhenkanal based MGM Steels Ltd., Aska (Ganjam) based All Infrastructures Private Ltd. and Satya Sai Constructions located at Binjarpur in Jajpur district have moved the High Court against the imposition of the cess. Though the High Court has stated that the collection will be subject to the decision of the court, it has not passed any stay order on the cess collection. In its submission before the High Court, MGM Steels stated that it is covered under the factory act and as such not liable to pay this cess. However, the government argued that it is not a factory as an establishment is covered under the factory act only when it is given a license after start of manufacturing.

Since the company is granted only pre-license, it is not covered under the factories act and liable to pay the 1 percent cess. Similarly, All Infrastructure Private Ltd and Satya Sai Constructions prayed before the court that it was not a part of their bilateral agreement signed with the workers. Hence, they are not liable to pay the cess.