New Delhi : A Parliamentary panel has recommended to the government to examine the feasibility of permitting CSR contributions in kind through an appropriate statutory or regulatory framework. It has supported increasing the threshold of profit to ₹10 crore for CSR, which would benefit Micro, Small and Medium Enterprises (MSME)
At present, the Companies Act says a company having net worth of ₹500 crore or more or turnover of ₹1,000 crore or more or a net profit of ₹5 crore or more in the immediately preceding financial years need to spend 2 per cent of its profit on Corporate Social Responsibility (CSR). The Corporate Laws (Amendment) Bill proposed raising the threshold for applicability of CSR to ₹10 crore. Also, it proposed additional time for transfer of unspent CSR amounts to the designated account, enhancing the threshold for constitution of the CSR Committee, and enabling exemption of such class or classes of companies as may be prescribed.
In its report, the Joint Committee, while favouring the higher threshold, was of the considered view that recognising in-kind contributions, where appropriately regulated, has the potential to enhance the effectiveness, flexibility and impact of CSR initiatives by enabling companies to leverage their core competencies and resources for public benefit. At the same time, the committee recognises that such a framework must adequately address concerns relating to objective valuation, transparency, auditability and accountability.
It also noted that the proposal of the National Disaster Management Authority (NDMA) to treat the free-of-cost supply of products for disaster relief as eligible CSR expenditure is presently under consideration and that valuation principles under the GST framework have been suggested for determining the value of such contributions.
The Committee, therefore, “recommend that the Government examine the feasibility of permitting CSR contributions in kind through an appropriate statutory or regulatory framework, incorporating robust safeguards, including objective valuation norms, independent verification, appropriate disclosure and reporting requirements, and effective monitoring mechanisms, so as to prevent misuse or overvaluation while ensuring that the objectives and integrity of the CSR framework are fully preserved.”
unutilised funds:
It agreed that CSR funds should not be utilised through any implementing agency, including organisations, trusts, societies, non-governmental organisations and Section 8 companies. It was of the view that any CSR contribution made to an entity included in a duly notified negative list should not qualify as CSR expenditure for the purposes of compliance.
Further it recommended that the criteria for inclusion of any entity in such a negative list should be objective, transparent and based solely on statutory provisions or orders passed by a competent authority, to ensure certainty, fairness and uniform application. It also recommended that the restriction should operate only for the period and subject to the conditions specified in the relevant notification, and that an appropriate statutory mechanism be provided for removal of an entity from the negative list upon the cessation of the grounds that led to its inclusion. Accordingly, it suggested change in the bill prescribing a negative list of entities ineligible to receive CSR contributions.
