The government has fast tracked the implementation of a high-level committee’s report on corporate social responsibility that suggested that violations be treated as civil offences liable to monetary penalties. “Implementation of this report is on fast track,” a government official told ET, adding that the Centre would soon take the necessary steps. Finance and corporate affairs minister Nirmala Sitharaman has given ‘a clear direction’ on this, said another official.
New Delhi has already decided not to operationalise the just-amended Companies Act section that specifically prescribes jail terms for CSR violations. Introduction of this specific provision had irked the industry, which raised objections to this provision with the government. Sitharaman had assured the industry of reviewing the provision.
The panel – headed by corporate affairs secretary Injeti Srinivas has suggested that the government classify offences under CSR provisions as civil breaches, attracting monetary fines. It has also favoured offering tax deductions for CSR spending and carry-forward of unspent balances for three-to-five years. Tax deductions may not immediately be available as the corporate affairs ministry will have to initiate consultations with the finance ministry. However, the government is likely to push the other suggestions.
The committee was set up in October 2018 to review the CSR framework and to suggest measures to strengthen the CSR ecosystem, including monitoring, implementation and evaluation of outcomes. A formal proposal could soon be taken to the cabinet, an official cited above said.
All companies with a net worth of Rs 500 crore or more, turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more are required to spend 2% of their average profit of the previous three years on CSR activities every year. The mandatory CSR provision was introduced in the 2013 Companies Act
The panel has also suggested bringing banks and limited liability partnerships (LLP) under the mandatory CSR expenditure framework and batted for inclusion of sports promotion, senior citizens’ welfare, welfare of differently abled people, disaster management, and heritage protection as permitted activities.
Source : PTI