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Section 107: Power to exempt from cess

The Code on Social Security, 2020 (Act No. 36 of 2020) • Official Statutory Text & Plain English Practice Guide

Statutory Mandate
Chapter VIII: Social Security and Cess for Building Workers
Competent Labour Forum
Act No. 36 of 2020
Section 106 All 163 Sections of Code on Social Security, 2020 Section 108

Legal Commentary & Landmark Judgments: Section 107

Section 107 of the Code on Social Security, 2020 empowers the appropriate Government to grant conditional exemptions from the levy of construction welfare cess, restricting exemptions strictly to cases where equivalent social security is already provided or exceptional public interest justifies relief.

  • Statutory Exemption Power and Gazette Notification: Empowers the appropriate Government, by notification in the Official Gazette, to exempt any employer or class of employers from the payment of cess payable under Chapter VIII, subject to such conditions and for such period as may be specified.
  • Condition Precedent of Equivalent Welfare Coverage: The statutory gateway requires that an exemption can only be considered where the appropriate Government is satisfied that the employer has already made arrangements for the social security and welfare of their construction workers that are not less favorable than those provided under the Code.
  • Prohibition on Arbitrary or Commercial Exemptions: Exemptions cannot be granted merely on grounds of commercial hardship, industrial promotion, or fiscal concessions; the sole statutory benchmark is the existence of an operational, fully funded employee welfare mechanism guaranteeing identical benefits.
  • Conditional and Revocable Character of Exemptions: Every exemption is conditional; if an employer breaches any of the conditions or fails to maintain the substitute welfare standards, the Government is empowered to revoke the exemption with retrospective effect and recover unpaid cess with interest under Section 101.
Key Landmark Precedents:
  • Union of India v. V.V.F. Ltd. (2020) 20 SCC 57: The Supreme Court held that statutory exemptions are matters of legislative grace and policy, and must be construed strictly against the party claiming the exemption; the burden lies entirely on the applicant to prove full compliance with exemption conditions.
  • Kasinka Trading v. Union of India (1995) 1 SCC 274: The Supreme Court affirmed that exemption notifications can be withdrawn or modified in the public interest at any time, and the doctrine of promissory estoppel cannot be invoked against the state in matters of statutory taxation and welfare levies.
  • Lanco Anpara Power Ltd. v. State of U.P. (2016) 10 SCC 329: Reiterated that construction cess applies comprehensively across all industrial and infrastructure construction works, and exemptions cannot be claimed merely because an establishment is regulated by other industrial laws.
Courtroom Practice & Strategic Litigation Guidance:

Companies seeking an exemption under Section 107 must compile a comprehensive dossier demonstrating that their construction workforce is covered by dedicated private group medical insurance, accident disability cover, and death benefits equal to or superior to the State Welfare Board's statutory schedule. Submit the petition to the Principal Secretary (Labour) with audited welfare balance sheets. If an exemption is granted, retain the official gazette notification on site to protect against local municipal cess attachment orders.

Section 106 All 163 Sections of Code on Social Security, 2020 Section 108