Taking into account the references/representations received from various stakeholders seeking clarifications on eligibility of CSR expenditure related to COVID-19 activities, a set of FAQs along with clarifications has been provided by the Ministry of Corporate Affairs (“MCA”) for better understanding of the stakeholders vide its General Circular No. 15/2020 dated 10th April 2020.
The brief overview of the clarifications issued by MCA are as follows:
Contributions which shall qualify for CSR Expenditure:
- Contributions made to ‘PM CARES Fund’ shall qualify as CSR expenditure under item no (viii) of Schedule VII of the Companies Act, 2013 (“Act”), as the PM-CARES Fund has been set up to provide relief to those affected by any kind of emergency or distress situation like COVID-19.
- Further, 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 Act.
- Spending CSR funds for COVID-19 related activities under items nos. (i) and (xii) of Schedule VII of the Act relating to promotion of health care including preventive health care and sanitation, and disaster management shall also qualify.
- Ex-gratia payments made to temporary, casual and daily wage workers by companies will be considered as CSR expenditure, provided that such payments are over and above disbursement of wages and an explicit declaration to that effect is issued by the Board of the company, which is duly certified by the statutory auditor.
Contributions which shall not qualify for CSR Expenditure:
- ‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ is not included in Schedule VII of the Act and therefore any contribution to such funds shall not qualify as admissible CSR expenditure.
- 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. It has also been clarified that 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.
- Payment of wages to temporary or casual or daily wage workers during the lockdown period is a moral/ humanitarian/ contractual obligations of the company, and thus does not counts towards CSR expenditure.