The High Level Committee on Corporate Social Responsibility (CSR) constituted by the Finance Ministry has recommended a tax on CSR spend.
- The committee headed by Corporate Affairs Secretary Injeti Srinivas suggested that CSR spends should become eligible for tax deduction under income tax law.
- Currently, income tax law does not apply to CSR expenses.
- This comes at a time the central government has recently amended the Company Law to make CSR spend mandatory for companies and making it a criminal offence in case of non-compliance.
- The Committee was constituted to review the current CSR framework and suggest ways to strengthen the CSR ecosystem including implementation, monitoring and evaluating.
The Committee also recommended
- Provision for carrying forward of unspent
balance for a period of 3-5 years.
- Aligning schedule VII with the Sustainable Development Goals (SDGs) by adopting an SDG plus framework. The Framework includes sports promotion, the welfare of differently-abled persons, heritage protection, Senior Citizens’ welfare, and disaster management.
- Balancing local area preferences with national priorities.
- Impact assessment studies for CSR obligation that are exceeding more than Rs. 5 crores.
- Registration of implementation agencies on MCA portal.
- Develop a CSR portal for connecting contributors, agencies and beneficiaries.
- CSR in social benefit bonds.
- Promoting social impact companies.
- Third-party assessment of major CSR projects.
- The committee is not in favour of treating CSR as a resource gap funding for government schemes.
- It also does not want CSR contribution into various funds under Schedule VII of the Companies Act.
- It wants CSR to be a board-driven process and find innovative technological solutions for social problems.
- The Committee does not want a company to constitute a CSR committee if its CSR contribution is below RS. 50 lakh.
- It recommended making violation of a CSR compliance a civil offence.
Penalizing for non-compliance appears to be a regressive approach. Instead, positive steps must be taken to ensure compliance.