Companies offer to help fight Covid-19 will be treated as CSR activity

The Centre on Monday declared contributions by companies towards fighting the Covid-19 pandemic as a corporate social responsibility (CSR) activity.

“In view of the spread of novel #coronavirus in India, its declaration as pandemic by the WHO, and decision of the government of India to treat this as notified disaster, is hereby clarified that spending of CSR funds for Covid-19 is eligible CSR activity,” Finance Minister Nirmala Sitharaman’s office tweeted.

Companies will be able to spend CSR funds through items listed under schedule VII related to promotion health care, preventive health care, sanitation, and disaster management. “...Items in schedule VII are broad based and may be interpreted liberally for this purpose,” a notification by the corporate affairs ministry said.

Schedule VII includes funds such as the Prime Minister’s National Relief Fund and Swachh Bharat Kosh.

Last week, the government allowed accredited private labs to conduct the tests of samples to ramp up its Covid-19 testing capabilities.

Corporate sector experts said it would be looking for viable alternatives for deployment of CSR funds considering March deadline is fast approaching. The latest notification is expected to help mobilise contributions towards this disaster.

Companies that want to support the government in the Covid-19 had no specific alternative except contributing to these funds which serve a large and generic purpose.

“There were companies who were willing to contribute funds to support the government but were not clear if this would classify as an eligible spend under preventive health care or disaster management. This circular from MCA reinforces the 2014 circular and helps in removing this confusion,” Anshul Jain, partner, PwC India said.

The government has also introduced draft rules for corporate social responsibility with a stricter definition of CSR and putting greater onus on companies to report details of CSR activities for increased monitoring on the way such funds are used.

Companies will now be required to submit a much more comprehensive form providing details of not just ongoing projects but any other projects. The reporting is not limited to the current financial year but extends to previous financial years too. For this purpose, the government has proposed to insert a definition for ongoing projects — “a multi-year project undertaken by a Company in fulfillment of its CSR obligation having timelines not exceeding three years excluding the financial year in which it was commenced…”

Companies in a separate form will have to provide the details of CSR amount spent or unspent for the preceding three financial years, according to proposed rules.

The effects of the pandemic on economic activity are being felt far and wide, far beyond the airline, travel, tourism, and hospitality sectors.