The pandemic COVID-19 has caused damages to the world economy. The Government of India has declared Coronavirus is notified as a disaster and spending CSR funds for COVID-19 is eligible CSR activity. The companies have come forward to help on a large scale. Keeping this in view the Ministery of Corporate Affairs vide General Circular No. 10/2020 clarified that spending of CSR funds for COVID-19 is eligible CSR activity.
Such funds may be spent on various activities related to COVID-19. The activities include:
Item no. (i) of Schedule VII - Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation, contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.
Item No. (xii) of Schedule VII - Contribution to incubators funded by Central Government or State Government or any agency or Public Sector Undertaking of Central Government or State Government, and contributions to public-funded Universities, Indian Institute of Technology (IITs), National Laboratories and Autonomous Bodies (established under the auspices of Indian Council of Agricultural Research (ICAR), Indian Council of Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR), Department of Atomic Energy (DAE), Defence Research and Development Organisation (DRDO), Department of Science and Technology (DST), Ministry of Electronics and Information Technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs)
The Board can take the necessary decision and contribute funds for COVID-19 activities.
Further on April 10, 2020, the MCA vide General Circular 15/2020 clarified which contributions will be considered for CSR activities. The MCA issued FAQs on the eligibility of CSR expenditure related to COVID-19 activities.
The FAQs are as under:
1. Whether contribution made to ‘PM CARES Fund’ shall qualify as CSR expenditure? - YES
The contribution made to ‘PM CARES Fund’ shall qualify as CSR expenditure under item no (viii) of Schedule VII of the Companies Act, 2013 (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? - NO
‘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 the State Disaster Management Authority shall qualify as CSR expenditure? - YES
The 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 Companies Act, 2013. (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? - YES
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. The funds may be spent on various activities related to COVID-19 under items nos. (i) and (xii) of Schedule VII relating to the 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? - NO
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 the 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? - NO
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? - YES, provided declaration is provided by the Board of the company and is certified by the Statutory Auditor.
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 an onetime exception. For making such payment, the Board of the company shall provide an explicit declaration to that effect, which is duly certified by the statutory auditor.
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