Labour Cess or certainly this could be referred to Building & Other Construction Workers' Welfare Cess (BOCWW Cess).

BOCWW Cess is levied on the cost of construction incurred by the employer as per the provisions of the Building and Other Construction Workers' Welfare Cess Act,1996

In order to find the value of supply of goods or supply of services in GST, we need to examine the term Consideration which is defined under Section 2(31) of CGST Act,2017 as under:

(31) 'consideration' in relation to the supply of goods or services or both includes''

(a)   any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;

(b)   'the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:

          Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;

Thus the above definition of 'consideration' clearly includes any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government.

As per the above given explanation, consideration would include the entire payment received by the supplier of services and GST would be payable on the entire amount collected by them from the recipient of service which include labour cess.

We also need to refer Section 15 of the CGST Act,2017, which pertains to Valuation of taxable supply and reads, as under:

Section 15: Value of taxable supply.     

(1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

'(2) The value of supply shall include''

a)  any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;

b)  any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;.

c)  incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;

d)  interest or late fee or penalty for delayed payment of any consideration for any supply; and

e)  subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.

Explanation.''For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.

(3) The value of the supply shall not include any discount which is given''

a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and

b) after the supply has been effected, if'

(i)     such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii)    input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

(4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed.

(5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed.

Explanation.'For the purposes of this Act,''

'(a) persons shall be deemed to be 'related persons' if''

                (i) such persons are officers or directors of one another's businesses;

                (ii) such persons are legally recognised partners in business 2(17)

'business' includes''

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; ;

                (iii) such persons are employer and employee;

                (iv) any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them;

                (v) one of them directly or indirectly controls the other;

                (vi) both of them are directly or indirectly controlled by a third person;

                (vii) together they directly or indirectly control a third person; or they are members of the same family;

'(b) the term 'person' also includes legal persons;

(c) persons who are associated in the business 2(17)
'business' includes''
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; of one another in that one is the sole agent  'agent' means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another; or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related.

Now as per the above mentioned extract, it can be seen that Section 15(1) clearly stipulates that the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

Further ,sub section (2) of Section15 elaborates  in detail, the items that are required to be included in the value of supply, whereas sub-section (3) of section15 specifically elaborates the items that are not included in the value of supply .

As per Section 15 of the CGST Act,2017, there is intent to include all taxes ,duties, cesses, fees and all charges in the value of supply and there can be no exception for BOCWW Cess (labour cess) from the recipient of service.

Thus, from the above mentioned explanation it can be  suggested that Labour Cess will be included in the value of supply and the same is taxable under the CGST Act,2017.

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Abhishek Gupta

Advocate