Thiruvananthapuram: The new labour codes implemented by the Central government will spare people building houses costing less than ₹50 lakh from paying building cess. As per law, a cess of one per cent is charged on the construction cost of a building, calculated based on its plinth area. Until the new code was passed, cess was effective on all buildings with a construction cost above ₹10 lakh or an area of more than 100 square metres (1,077 square feet).

The new codes came into effect on November 21. As the cess is calculated based on the building permit, the new rule will apply to applicants who obtain a permit after this date. However, clarification is required from the state Labour Department in this regard.

Of the four labour codes, Section 2(6) of the Social Security Code deals with the cess on houses. As per this law, state governments can raise the upper limit of construction cost from ₹50 lakh to collect cess, but lack the power to reduce the amount. At the same time, the stipulation in the law that makes the payment of a one per cent cess mandatory for the construction and maintenance of commercial buildings will continue, despite the cost incurred.

A major blow for state Labour Department
The state Labour Department will witness a sharp dip in its revenue following the implementation of the new Central rule, which increases the limit on the construction cost of houses to pay the cess. In Kerala, the cess is collected by the state Building and Other Construction Workers' Welfare Board, which receives around 70 per cent of the total amount from residential houses. The cess collected by the Board is utilised to fund workers' pensions.

Incidentally, payment of the monthly pension of ₹1,600 has been pending for the past 17 months. The total arrears for pension and other benefits for construction workers have mounted to ₹1,163 crore, of which pension arrears alone come to around ₹1,000 crore.