New Delhi: India’s corporate affairs ministry has noted that financial contributions made to any ‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19′ cannot be claimed as ‘corporate social responsibility’ (CSR) spending by companies.
This clarification comes less than two weeks after the ministry of corporate affairs (MCA) said all corporate donations to Modi’s ‘PM CARES Fund’, which was set up to fight the COVID-19 pandemic, could be counted as CSR expenditure that all companies are mandated to make by law.
Sources told The Wire that the MCA and finance ministry had both received a number of requests to allow companies to count their donations to ‘Chief Minister’s Relief Fund’ also as CSR spending.
“‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ is not included in Schedule VII of the Companies Act, 2013 and therefore any contribution to such funds shall not qualify as admissible CSR expenditure,” an MCA circular noted.
The circular added however that corporate contributions made to each individual State Disaster Management Authority to combat COVID-19 “shall qualify as CSR expenditure under item no (xii) of Schedule VII of the 2013 and clarified vide general circular No. 10/2020 dated 23rd March, 2020”.
In addition to this, India Inc can also count any “ex-gratia payment made to temporary or casual workers” that they employ as CSR expenditure provided it is made for the purpose of fighting COVID-19.
The ministry, however, has clarified that this is only a “one-time exception” provided to companies only after the board of the company makes an explicit declaration to this effect and it is duly certified by the statutory auditor.
Also Read: Would Narendra Modi Please Care to Answer Some Questions About PM-CARES?
What are India Inc’s CSR obligations?
Most companies are mandated by law to spend 2% of their average net profits (as calculated by the average of the preceding three financial years) on CSR duties.
These CSR funds can be used for a wide range of activities, including helping alleviate poverty and hunger, promoting skill development and education and disaster relief.
At present, companies with a net profit of Rs 5 crore or a net worth of Rs 500 crore or a turnover of Rs 1,000 crore have to spend 2% of their average net profits of the last three years as CSR.