A High Level Committee (HLC) to look into and suggest reforms for the Corporate Social Responsibility (CSR) regime for companies in India submitted its report to the Union Minister of Finance and Corporate Affairs Nirmala Sitharaman yesterday (13 August).
CSR had been under focus ever since the a recent amendment to the Companies Act which made non-compliance to CSR norms a punishable offence. However, the government has decided to not operationalise it after it sent shockwaves in the industry.
The HLC had hence been setup to suggest reforms for the system. The committee has suggested that the violation of CSR compliance should be made a civil offence and shifted to the penalty regime. The HLC has also recommended that companies having CSR prescribed amount below Rs 50 lakh may be exempted from constituting a CSR Committee. To further incentivise CSR spend the committee has recommended making CSR expenditure tax deductible.
To make CSR funds more impactful the HLC suggests the development of a CSR exchange portal to connect contributors, beneficiaries and agencies, allowing CSR in social benefit bonds, promoting social impact companies, and third party assessment of major CSR projects.
Another important recommendation of the HLC is to avoid treating CSR as a means of resource gap funding for government schemes. In furtherance of this objective, the committee discourages passive contribution of CSR into different funds included in the Act.
Other suggestions of the HLC include a provision for carry forward of unspent balance for a period of 3-5 years, aligning CSR with Sustainable Development Goals (SDGs) and balancing local area preferences with national priorities.