Clarifications provided by Government regarding CSR

Recently Ministry of Corporate Affairs has issued a circular further clarifying the scope of CSR activities.

  1. It states that Schedule VII is to be interpreted liberally so as to capture the essence of services included in Schedule VII. The circular includes an annexure, where various queries raised have been answered in quite a liberal manner. For example, it has suggested that
    • ‘awareness for road safety’ is covered by education.
    • ‘training to drivers’ is covered by ‘vocational training’.
    • ‘capacity building of farmers/agricultural labourers can be covered by ‘vocational skill’.
    • ‘consumer education and awareness’ may be covered under ‘education’
    • ‘donations to IIM(A) for ‘conservation of buildings and renovation of classrooms’ can be covered under ‘education’
    • Similarly disaster relies though not specifically covered under CSR, it has stated that ‘medical aid during such calamity’ can be covered under ‘promoting Health care’, food supply to be covered under ‘eradicating hunger, poverty and malnutrition’
    • Similarly research studies can be covered under relevant areas of different clauses.

Only place it has given a negative opinion is expenditure on government servants, elected representatives, etc. whether of capacity building or of similar nature.

From the above it is clear that the government has taken quite a liberal attitude in application of schedule VII, and the approach seems to be to fit a CSR activity under one or other clause.

  1. CSR activities should be undertaken in programme / project mode (interpretation seems to be that a planned activity which is a sustainable activity). It has particularly banned any activity which is one off, e.g. marathon event, award, or even one of charitable donation, advertisements, sponsorship of TV shows.
  2. Any expenditure incurred for compliance of legal requirements would not qualify for CSR expenditure, this includes compliance with Land Acquisition Act, Labour Laws, etc.
  3. Salaries to CSR staff or even proportionate salary of company staff volunteering would be considered as CSR expenditure.
  4. Contribution to corpus of entities (Societies/Trusts / S. 8 companies (the new clause for S. 25 companies under the new Companies Act) will be considered eligible for CSR only if the corpus is meant for an entity which would exclusively undertake CSR activity or the corpus is meant exclusively for projects to be undertaken identified under Sch. VII.

Socio Research & Reform Foundation (NGO)
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