Understanding Running Account Bills and Statutory Deductions
A running bill looks intimidating until you see it as a simple build-up: value of work, taxes added, then a stack of recoveries, ending in one net figure.
What a running account bill does
A running account (RA) bill pays a contractor for the work measured and accepted up to a point in time, while the contract is still live. Because the work continues, each RA bill is cumulative: it values all work done so far and then subtracts everything already paid.
Reading a bill correctly means separating two distinct stages: building up the gross value of the work, and then applying the recoveries that bring it down to what is actually paid.
Building up the gross value
Start from the value of work done, taken from the measured quantities in the M-Book priced at agreement rates. Any contractual adjustment such as a tender premium (excess or less over the estimate) is applied to this value first.
Where applicable, statutory levies that increase the bill, such as GST charged on the contractor's invoice, are added to arrive at the total gross value of work done to date. From this, the gross value already paid in previous bills is subtracted to get the gross value of the current bill.
The stack of deductions
From the current gross, a set of recoveries is deducted. These typically include income tax deducted at source, labour welfare cess, GST tax deducted at source, a quality-control levy where applicable, and any other specified recoveries.
Each deduction is a defined percentage of a defined base, so the order and the base matter. Getting the base wrong, for example applying a percentage to the post-tax rather than the pre-tax value, is a frequent source of bill errors.
Retention, EMD and withheld amounts
On running and part bills, a retention or security amount is often withheld as a safeguard against defects, to be released later. Earnest money and other securities may also be adjusted through the bill.
These are not expenses to the contractor so much as amounts held back; they are recovered now and released at defined milestones, which is why a clear memo must show both the withholding and any later release separately.
Arriving at the net payable
The net amount payable is the current gross less all deductions, plus any previously withheld amount now being released. A well-laid-out memo of payment walks through exactly these steps so the figure can be verified line by line.
When the memo is generated from the same engine that drives the expenditure register, the present bill, cumulative value and balance stay consistent with the reports, and the net payable is reproducible rather than hand-calculated.
Why is a running account bill cumulative?
Because the contract is still live, each RA bill values all work done to date and then subtracts everything already paid in previous bills, so the balance paid rises correctly over time.
What are typical statutory deductions on a bill?
Common recoveries include income tax deducted at source, labour welfare cess, GST tax deducted at source, a quality-control levy where applicable, retention or security, and any other specified recoveries.
What is retention on a running bill?
An amount withheld as a safeguard against defects during execution, recovered through running and part bills and released later at defined milestones. It is held back, not an expense to the contractor.