Bill with Labor cess

[Guest]

Dear Sir,

We awarded some civil contract to some contractors/companies. In work order we mentioned we will reimbursed a labor cess amount after submission of proof.

Now, contractors raised an invoice with labor cess. This type of invoice, How can pass for further payment.

Example:- Bill amount ₹ 100/- and labor cess is 1% on basic value, Total value is 101. My superior has advised for passing this type of invoice.

Our HR head told pass the ₹ 100/- & 1% amount to be deposit at BOCW.

Please suggest.

Sanjay Vasava

[YAGAY andSUN]

Labour cess is statutory dues. You would have to pass the accounting entry for INR 101.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse YAGAY

[Ganeshan Kalyani]

The contractor is liable to pay Labour Cess.

The Cess Act Mandates Every ‘Employer’ In Relation To An Establishment Who Carries On Building And Construction Work To Pay A Cess Of 1% Or The ‘Cost Of Construction’.

[Guest]

Dear Sir,

I advised to contractors to be paid 1% labor cess of basic value & submit chalan and DD xerox copy to us for reimbursement.

[Ganeshan Kalyani]

Service tax is not applicable on reimbursement of government dues.

[Guest]

Dear Sir,

But how can I booked in my accounts book. Invoice raised rs. 101/- including labor cess. And we will paid rs. 100/- to contractor & 1% labor cess directly paid by us. Please explain accounting entry.

Sanjay Vasava

[Ganeshan Kalyani]

The contractor shall pay Labour Cess from his registration number. If he had charged on invoice, then it means that he has paid the dues to Govt and now he is seeking reimbursement. Hence you should book full amount including Cess and pay to the contractor.

[YAGAY andSUN]

Contractors are liable to pay the Labour Cess but not first by on their own. They will first recover it from your and then pay to the Government.

[Guest]

Dear Sir,

After claiming amount from us, but contractor not paid labor cess to gov. In this conditions what will take action??

Thanks & Regards,

Sanjay Vasava

[Ganeshan Kalyani]

You may ask acknowledgement. But prima facie it is his responsibility to pay the tax. If he does not then he will have to face consequences from the department. You will not be held responsible because you had made payment to him.

AI Summary

Labour cess recovery and accounting: treat invoiced cess as statutory due, book full amount and ensure remittance. Labour cess included in a contractor's invoice is a statutory due and should be recorded as part of the payable amount. Employers should book the full invoiced sum and either obtain proof of the contractor's remittance (chalans, DD receipts) before reimbursing or pay the cess directly and retain receipts; the contractor remains primarily liable for remittance and faces departmental consequences if he fails to pay.