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MINUTES OF 3rd BOARD OF CHIEF ENGINEERS MEETING FOR THE

YEAR 2019 HELD ON 27.06.2019 @ 3.30PM IN THE BOCE CONFERENCE
HALL OF ENGINEER-IN-CHIEF (AW), I & CAD DEPARTMENT,
ERRUM MANZIL, HYDERABAD.

At the outset the Engineer-in-Chief (AW), Chairman, Board of Chief Engineers

has welcomed all the participants and placed the following agenda for discussions by
the members of the Board of Chief Engineers. The names of the officers attended the
meeting is appended vide Annexure-I. The Engineer-in-Chief (AW) has initiated the
discussions.

Agenda item No – 1:
Irrigation & CAD Department – Provision of Labour Cess @ 1% - Discrepancies
in implementation of Labour Cess in the work bills of the Contractors by different
Engineering Departments – Requested for the uniform adoption of Labour Cess by
all Engineering Departments - Placed before Board of Chief Engineers
(BOCEs)for its discussion and necessary recommendation – Directed by the
Government - Regarding.
Proposed by Engineer-in- Chief (AW), I & CAD Dept. and
Chairman, Board of Chief Engineers

 The Board of Chief Engineers (BOCEs) has discussed the Labour Cess issue
during its meeting held on 29.05.2018 and after comprehensive deliberations in
the matter the BOCEs has recommended the following.

a) Ongoing Works: (existing Contracts agreements)

It is concluded that for all on-going works as the agreements entered

into with the Contractors in various Engineering Departments are
legally binding, the procedure to be adopted in respect of Labour Cess
has to be in accordance with the provisions made in the Agreements and
hence to be followed.

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b) Future Works:

For future works, it is recommended to adopt a uniform policy

regarding Labour Cess and its implementation for all the future works
across all the Engineering Departments. It is concluded that making a
separate provision in the estimate @ 1% towards labour Cess in Part-B
of the estimate adding 1% towards labour Cess in the works bill and
deducting the same would be appropriate. However the decision in this
regard may be taken after obtaining legal opinion from the Law
Department/ Advocate General.
 Based on the representation of Builders Association of India(BAI), Telangana
dated 12.06.2018 and Government Memo(TR&B Dept) No 3150/R.I(1)/2016,
dated 23.06.2018, the Board of Chief Engineers has revisited the Labour Cess
issue in detail during its meeting held on 29.06.2018.

 After detailed deliberations in the matter and in partial modification of its

earlier recommendations on Labour Cess dated 29.05.2018 for the ongoing
works, the Board of Chief Engineers has opined the following.

“As a uniform procedure, the Labour Cess for the ongoing works of R&B and
Panchayat Raj Departments may also be considered duly making provision
for the same in Part-B of the Revised estimates of respective works for addition
and recovery”.
 The above minutes of meeting of Board of Chief Engineers was communicated
to the Government vide ENC(IW) letter No.ENC/IW/P&M/ EE/ DEE.2/
AEE.5/ BOCE/ 61108/2018 dated 04.07.2018.

 Further, the Government vide Memo No.4339/Reforms/2018(I&CAD), dated

27.09.2018 has desired to implement uniform procedure towards provision of
Labour Cess in Works Contracts of all the Engineering Departments in the
State and directed to submit a report on practice being followed by the other
State Governments with regard to the provision to be made in the
estimate/reimbursement of 1% Labour Cess.

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 The desired information was submitted to the Government vide letter No

ENC (IW)/SE (PMU)/EE(P&M)/DEE.1/AEE.2/LC dated 29.10.2018.

 Now, the Government vide Memo No 4339/Reforms/2018, dated 14.06.2019

has requested the Engineer-in-Chief (I.W), I&CAD Dept., to place the
following subject matter before the Board of Chief Engineers(BOCEs) to
furnish its views afresh recommendations to the Government for taking
further action in the matter.

i) In view of different rates being adopted for the Overhead

charges and Contractors Profit by various Departments and
varying rates for different works within the same department,
recommendation of BoCEs stating up to what extent harmonization
could be achieved among various Departments.

ii) How to treat various Taxes (rates variations) & Cesses (Labour
Cess) uniformly within different Departments.

iii) Any other issue

In this regard, the Chairman, Board of Chief Engineers (BOCEs) vide letter
dated 25.06.2019 has requested the HODs of all Engineering Depts to attend the
proposed BOCEs meeting on 27.06.2019 along with detailed note on the subject issue
(i.e., on above 3 points as directed by the Govt) pertaining to their Departments for its
detailed discussion and necessary recommendations in the matter.

The copies of minutes of BOCEs dated 29.05.2018, 29.06.2018, ENC(IW)

letter dated 29.10.2018 and Government memo dated 14.06.2019 are placed before

Board of Chief Engineers for discussion and necessary recommendation in the matter.

The Board of Chief Engineers has discussed the issue in detail and after
detailed deliberations in the matter BOCEs has recommended for harmonization
of Overheads and Contractors profit across all Engineering Departments by
uniformly adopting @ 13.615% by all Engineering Depts wherever Standard
data is adopted for all types of future works of Government of Telangana.

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In respect of treating various Taxes (rates variations) & Cesses

(Labour Cess) uniformly within different Departments, the Board of Chief
Engineers has opined that, the earlier recommendations of BOCEs dated
29.05.2018 and 29.06.2018 holds good for uniform implementation of Labour
Cess across all Engineering Depts and recommended as below.

For all on-going works of all Engineering Departments, uniform procedure

shall be adopted towards Labour cess by making provision for the same in
Part-B of Revised estimates (REs) wherever such provision is not existing in the
concluded agreements. A separate provision in the estimate @ 1% towards
Labour Cess in Part-B of the estimate shall be made in all Engineering works of
Government of Telangana in respect of all future works, since the Government is
the principal employer as per Labour Dept Memo No 3546/T/76-2,
dated 26.04.1976

Action: Engineer-in- Chief (AW), I & CAD Dept. and

Chairman, Board of Chief Engineers
Agenda Item No 2 :

Schedule of Rates as per Telangana Revised Standard Data for the year 2017-18 –
Report of Sub-Committee on break-up of Overheads & Contractors Profit -
Submitted – Requested to place the issue before Board of Chief Engineers - For
discussion and necessary recommendations–Regarding.
Proposed by Engineer-in-Chief, (SR&CRN) R&B Department and
Chairman, Sub-Committee

The Engineer-in-Chief (State Roads, CRN & PPP), R & B Department and
Chairman, Sub-Committee, vide letter dated 10.06.2019 has reported that, the
Schedule of Rates for the year 2017-18 is approved by the Chairman, BOCE (SoR)
with new tax system GST, Over heads and Contractors profit with 13.615%. In the
annual Board of Chief Engineer's meeting held on 19.08.2017, Chief Engineer/ Civil,
TS TRANSCO has raised the issue of Overheads and Contractors profit and stated
that the Overheads and Contractor profit of 13.615% is inclusive of Sales/Turnover
Tax of 1.85%. Under the GST regime, all legacy taxes are subsumed, the same has to
be deducted from Overheads and Contractors profit. Thus the Overheads and
Contractors profit has to be reduced from 13.615% to 11.765%.

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In this regard, the issue was discussed in the Board of Chief Engineers meeting
held on 24.10.2017. After detailed discussion in the BoCE and it is opined to form
Sub-Committee. The Chairman of BOCE has constituted Sub-Committee vide letter
No, ENC/IW/P&M/ EE.I/DEE-2 /AEE4/SOR 2017-18Nol-I/17 Dt.18-11-2017 to
study the subject matter and for recommending to the BoCE.

In this connection, the Sub-Committee met on 04.12.2017 and discussed the

subject issue and the Committee has opined to compare the overheads and contractors
profit with that of neighboring states like Karnataka, Madhya Pradesh & Maharastra.

The Karnataka State Water Resources Department in its SoR & Standard Data
for the year 2016-17 has provided Contractors Profit @ 10%, Contractors Overheads
@ 5%, hidden cost on Labour @ 15% & small tools & plants @ 1 %.

The Madhya Pradesh State Water Resources Department in its SoR & Standard
Data for the year 2017-18 has provided Contractors Profit & Overheads @ 10%,
Sundries @ 1 % and Labour cess @1%.
The Maharastra State Water Resources Department in its SoR & Standard Data
for the year 2016-17 has provided Overhead charge@ 10% only.
Further, Sub-Committee has opined to obtain detailed report on break-up of
overheads and contractors profit from Chief Engineer/ Civil, TS Transco for necessary
discussions & recommendations and invited him to the meeting to elicit his views. In
this connection, Chief Engineer/ Civil, TS Transco has furnished report of BoCE
agenda item of Excess & repetitive tax provisions in the estimates proposed in the
Andhra Pradesh.

The Sub-Committee met on 08.01.2018 and discussed in detail on the report

furnished by the Chief Engineer/ Civil, TS Transco. The Sub-Committee has opined to
obtain the authentication report of break-up of overheads and contractors profit from
the Vigilance & Enforcement Department and Center for Good Governance for
necessary discussions. In this regard, letters were addressed to the Vigilance &
Enforcement Department and Center for Good Governance duly requesting for
authentication report of breakup of overheads and contractors profit.

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The Vigilance & Enforcement Department has furnished that, the details of
component wise overheads & contractors profits are not available with them and
Center for Good Governance has informed that there is no scientific data available
with CGG to analyze and arrive at the percentage breakup as the overheads largely
depend on the organizational capabilities of the bidder and terms & conditions of each
contract.

Finally, the Sub-Committee met on 09.04.2018 and held detailed discussions

on the over heads and contractors profit in SoR and the recommendations of High
level committee (05.10.2006) and BoCEs recommendations (25.08.2006)

After detailed discussions, the Sub-Committee has opined that as per the
recommendations of High level committee the overheads and contractors profits is
@ 18 % includes various items as recommended in MORTH Data including VAT.
After excluding VAT and Insurance components, overheads and contractors profits is
@ 13.615%. The GST will be applicable from 01.07.2017, subsuming VAT/ST.
The Sub Committee felt that, the components involved in the Overheads &
Contractors profit are dynamic in nature and breakup of the components involved in
the Overheads & Contractors profit is not available.

Therefore, the committee felt that it is difficult to arrive at any conclusion for
deducting either the Sales tax or Turnover tax of @ 1.85 % from Contractor overheads
& profit.

The Sub-Committee has recommended to place the matter before Board of

Chief Engineers to take necessary action.
Copy of minutes of Sub-Committee is placed before the Board of Chief
Engineers for its detailed discussion and necessary recommendation in the matter.

The Board of Chief Engineers has discussed the issue in detail duly
examining the report furnished by the Sub-Committee and opined that it is
difficult to analyze and arrive at the percentage breakup of Overheads &

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Contractors Profit as these overheads are Project specific and dynamic in nature
and largely depends on organizational capabilities of bidders and terms and
conditions of each Contract. Thus any percentage adopted is empirical only.
Further, BOCEs opined that the component of sales/turn over tax is not
deductible as embedded tax.

Action: Engineer-in-Chief, (SR&CRN) R&B Department

Agenda Item No 3 :

COT - “Submission of GST returns three (3) months before the running quarter
for tendering in lieu of GST Clearance certificate’’– Incorporation of necessary
clause in SBD - Requested to place the issue before Board of Chief Engineers - For
discussion and necessary recommendations – Regarding.
Proposed by Engineer-in-Chief (AW), I&CAD Dept
and Commissioner, COT

The Commissioner, COT vide letter dated 28.05.2019 has informed that during
the Commissionerate of Tenders meeting held on 20.05.2019 , the members opined
that, a finality on the input tax of GST applicable to the agencies was finalized in
1st Board of Chief Engineers meeting during the year 2019 held on 23.03.2019.
Till such time GST Clearance Certificate may not be the correct term to use in tender
conditions. Instead of GST Clearance, it may be appropriate to ask for the last GST
Return i.e., 3 months before the running quarter for tendering and opined to
incorporate the following clause in tender documents in future duly addressing to
BOCEs for appropriate decision.

Clause: ‘’Submission of GST returns three (3) months before the running
quarter (Financial year from 1st April of Current year) for tendering in lieu of
GST Clearance certificate’’

In this regard, copy of Minutes of meeting of the Commissionerate of Tenders

held on 20.05.2019 is placed before the Board of Chief Engineers for its detailed
discussion and necessary recommendation in the matter.

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The Board of Chief Engineers has deliberated the matter in detail and
recommended to include the GST returns clause in future tender documents
as below.
"Latest GST returns of the preceding quarter i.e., three (3) months before the
month of tendering shall be submitted by the prospecting bidders."

Action: Engineer-in-Chief (AW), l&CAD Dept

and Commissioner, COT

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Engm~ f(A~ ,
Irrigation &CAD Department and
Chairman, Board of Chief Engineers