As we all know, FCRA 2020 made some fundamental amendments, and now it is not possible for a NGO to transfer Foreign Contribution (FC) including in kind Foreign contribution to another NGO. The pandemic has resulted in a lot of support for India worldwide, and a large amount of donations both in money and in kind have been rec’d. The in-kind donations mainly consists of essential medicines, oxygen supply equipment, ventilators, beds, etc. Several NGOs have been raising queries, if they can transfer these equipments, etc. to other charitable or Govt hospitals, considering the amendment under S.7 has taken away the power of transfer of FC (incl. In-kind assets) to other agencies. This is a real dilemma for most NGOs on how to provide succor relief to people in current situation.
Many NGOs have health improvement objectives included in their Trust Deeds/byelaws, though many may not be running hospitals. Does the FCRA amendment mean that such NGOs now cannot fulfil their health related objectives with FCRA funds. I believe this is not a correct position. Section 8(1)(a) of FCRA Act shows the way. Although overall section relates to Speculative & Administrative purposes, however the initial part of the section states ‘Every person, who is registered and granted a certificate or given prior permission under this Act and receives any foreign contribution,
(a) shall utilise such contribution for the purposes for which the contribution has been received ……..’.
The above clearly lays down method on how an NGO which receives FC can utilise the same. It should be utilised for the purposes for which it was received. Thus the two important terms, which arise from S.7 & S.8 are ‘Transfer’ and ‘Utilization’. The amendment though it has prohibited transfer, howeverit does allow utilisation.
It is upto an NGO how it formulates its project, so that FC is utilised and not transferred.
Example: Some NGOs have indicated that they have rec’d the FC in kind, for enhancing healthcare infrastructure. Say oxygen plant has been rec’d. Obviously the NGO unless it itself is running a hospital cannot install the plant, however if the purpose of the grant is to enhance healthcare infrastructure of Hospitals, what stops it to actually implement a project enhancing such infrastructure. It could give such Oxygen Plants or ventilators to the Hospitals, with certain safeguards. For the NGO, utilisation takes place, as soon as it installs the Plant at the Hospital. Or a ventilator is given to the Hospital to enhance its capacities at the ICU. The NGO will record its project expenditure as soon as it hands over these equipment to the Hospitals. This can be treated as Utilisation of FC and not transfer. Thus the project that the NGO formulates is for ‘enhancing infrastructure of Hospitals’. In other words for the NGO the direct beneficiaries of the projects are Hospitals.
To whom all an NGO could give such benefits to? Obviously the NGO would give these to Hospitals. My suggestion is that the beneficiaries of such a project should be Govt Hospitals, as most Govt hospitals are exempt from FCRA provisions due to the Notification No. SO 459E dt 30th January 2020, as long as they are subject to compulsory audit by CAG or its agencies. In this regard most Govt hospitals are subject to audit by CAG/AG.
Can the NGO give these to other Hospitals run by Charitable agencies? While I believe if the objective of the Project is to enhance infrastructure of Hospitals, and if the project is properly formulated, this may be considered. However, considering FCRA amendment has directly prohibited transfers to FCRA registered charitable entities, therefore to be safe, it should not consider such charitable hospitals and focus only on Govt Hospitals eligible under above referred Notification.
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There is no doubt, that FCRA amendments in 2020 have made a hash of NGO sector working. The changes are so fundamental, even BJP CA cell has made a representation to Ministry of Home, calling FCRA 2020 amendments as Drastic changes …. not proper and causing undue hardships to NGOs. (https://thetaxtalk.com/2021/05/31/drastic-changes-made-in-fcra-and/ ) I fully agree with you that non-registered entities cannot receive FCRA even if ‘in-kind’. Nowhere in the article I have suggested the same. In fact I even suggest that FCRA registered entities should be avoided, considering changes in Section 7.
My suggestion is for giving to only Govt hospitals, and that who qualify under Circular 459E dt 20-1-2020. Yes municipality hospitals may not qualify, but a number of hospitals including AIIMS, State Hospitals, District Hospitals, PHCs, etc. will qualify.
I do not think, I have been very liberal in interpretation at all, since I have only suggested Govt hospitals, but thank you for your inputs and comments. Basic idea behind this view is that most people have forgotten about utilisation per S.8(1), and utilisation is different under different projects. Not everything is transfer.
This is a conundrum. As you have rightly asked whether giving the equipment in kind would be a utilisation or transfer? Would it be a contravention if say instead of receiving the equipment as in kind donation, an NGO buys the equipment and then gives it to a hospital, even though the health objectives are being fulfilled?
In my opinion, if the recipient is an organisation/association (say hospital) and not registered under FCRA then that would be a violation with or without the new amendment.
Also not all government hospitals are owned by Central or State Government or established under and Act (For e.g. AIIMS hospital), but might be owned by the local municipality which are not covered under the said notification. So one has to be very certain about the ownership or origin of a government hospital while applying this notification.
If an arrangement could be done to give to one of the AIIMS hospitals, JN Universities (which have been established under an Act and in many states are being used as makeshift health care facilities for Covid treatment/ Red Cross) who could then transfer to the intended recipient then that would be legal.
I believe unless a clarification is issued by FC department on this issue, liberal interpretation of the provisions of the amended FCRA could have an adverse consequence especially when the renewal is at horizon.
This is my personal opinion.