The Centre has asked the Indian corporates to submit a comprehensive report on their corporate social responsibility (CSR) activities, specifying an 11-page form (CSR-2) for this purpose. The new and comprehensive report is supposed to give the government a complete picture of the expenditure of CSR funds and the activities carried out in the financial year.
According to a report published in TaxGuru, the Ministry of Corporate Affairs (MCA) said that the form must be submitted to the Registrar of Companies for the previous fiscal year (2020-21) and beyond. For details on the fiscal year 2020-21, the CSR-2 is due by the end of March 2022.
The move drew mixed reactions from business and legal experts, with some saying it would increase the compliance burden on the company, as some of the information required for CSR-2 is already part of the annual report as part of the principal directors’ report.
However, some corporate observers believe that the CSR data collection, under CSR-2, may be useful for data mining and analysis for the MCA’s CSR department to introduce better policies on this front.
CSR-2, among other things, requires specific companies to report on issues such as the composition of the CSR Committee, its meetings, whether the company has included its CSR Committee on its website, CSR policy, CSR projects and CSR-approved programmes.
In addition, the company must ensure that the impact assessment of CSR projects is carried out in accordance with the company’s 2014 regulations (CSR Policy). Under the report, the company is also required to submit detailed information around its investment in CSR projects and the quantum of funds that has remained unspent.
“We believe the action taken by MCA is effective but in future efforts should be made by MCA to acquire maximum information with minimum increase in compliances,” Maneet Pal Singh, Partner, I.P. Pasricha & Co said. Pritika Kumar, founder and counsel, Cornellia Chambers, said this is an impactful amendment that will improve the manner in which corporate social responsibility as a concept is being managed across India.
The Companies Act 2013 requires companies with a net worth of ₹500 crore or more or turnover of ₹1,000 crore or more or a net profit of ₹5 crore or more during the immediately preceding three years to spend 2 per cent of the average net profit on CSR activities.
It maybe recalled that India Inc’s (1,619 companies) CSR spend for FY 2020-21 fell sharply to ₹8,828.11 crore, much lower than the cumulative spends of ₹20,150.27 crore (25,099 companies) in FY19 and ₹24,688.66 crore (22,531 companies) in FY20.