What Covid-19 contributions get qualified as CSR expenditure. Here’s the complete list

Economy


The Ministry of Corporate Affairs has issued an FAQ on what qualifies as contrbution towards CSR activities of the corporates in their fight against Covid-19.

The FAQ clarifies that contribution made towards the PM Care fund qualifies as CSR, funds given to Chief Minister’s Relief Fund does not qualify as CSR.

Among other expenditures that are considered as CSR include contributions made to state disaster management authority to fight against Covid-19, spending on Covid-19 related activities like preventive health care and sanitation and any ex-gratia paid to temporary/casual workers over and above their daily wages.

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However, the ministry clarified that daily wages to workers is part of moral/humanitarian/contractual obligation of employers and can’t be considered as CSR spend.

The PM CARE fund was established to receive contributions from those who wanted to do their bit in combating the Coronavirus pandemic.

As per the MCA circular, Schedule 7 of the Companies Act, 2013, contribution to any fund set up by the central government for socio-economic development and relief qualifies as CSR expenditure.

Here’s the FAQ:


1. Whether contribution made to ‘PM CARES Fund’ shall qualify as CSR expenditure?
Contribution made to ‘PM CARES Fund’ shall qualify as CSR expenditure under item no (viii) of Schedule VII of the Companies Act, 2013 and it has been further clarified vide Office memorandum F. No. CSR-05/1/2020-CSR-MCA dated 28th March, 2020.

2.Whether contribution made to ‘Chief Minister’s Relief Funds’ or ‘State Relief Fund for COVID-19’ shall qualify as CSR expenditure?
‘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.

3.Whether contribution made to State Disaster Management Authority shall qualify as CSR expenditure?
Contribution made to 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.

4.Whether spending of CSR funds for COVID-19 related activities shall qualify as CSR expenditure?
Ministry vide general circular No. 10/2020 dated 23rd March, 2020 has clarified that spending CSR funds for COVID-19 related activities shall qualify as CSR expenditure. It is further clarified that funds may be spent for various activities related to COVID-19 under items nos. (i) and (xii) of Schedule VII relating to promotion of health care including preventive health care and sanitation, and disaster management. Further, as per general circular No. 21/2014 dated 18.06.2014, items in Schedule VII are broad based and may be interpreted liberally for this purpose.

5.Whether payment of salary/wages to employees and workers, including contract labour, during the lockdown period can be adjusted against the CSR expenditure of the companies?
Payment of salary/ wages in normal circumstances is a contractual and statutory obligation of the company. Similarly, payment of salary/ wages to employees and workers even during the lockdown period is a moral obligation of the employers, as they have no alternative source of employment or livelihood during this period. Thus, payment of salary/ wages to employees and workers during the lockdown period (including imposition of other social distancing requirements) shall not qualify as admissible CSR expenditure.

6.Whether payment of wages made to casual /daily wage workers during the lockdown period can be adjusted against the CSR expenditure of the companies?
Payment of wages to temporary or casual or daily wage workers during the lockdown period is part of the moral/ humanitarian/ contractual obligations of the company and is applicable to all companies irrespective of whether they have any legal obligation for CSR contribution under section 135 of the Companies Act 2013. Hence, payment of wages to temporary or casual or daily wage workers during the lockdown period shall not count towards CSR expenditure.

7.Whether payment of exgratia to temporary /casual /daily wage workers shall qualify as CSR expenditure?
If any ex-gratia payment is made to temporary /casual workers/ daily wage workers over and above the disbursement of wages, specifically for the purpose of fighting COVID 19, the same shall be admissible towards CSR expenditure as a onetime exception provided there is an explicit declaration to that effect by the Board of the company, which is duly certified by the statutory auditor.



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