Panel For Tax on CSR Spend

Tax on CSR

In News

The High Level Committee on Corporate Social Responsibility (CSR) constituted by the Finance Ministry has recommended a tax on CSR spend.

In-Detail

  • 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.

Other Recommendations

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.

Conclusion

Penalizing for non-compliance appears to be a regressive approach. Instead, positive steps must be taken to ensure compliance.

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