Corporate social responsibility rules that kicked in on Friday also set a three year time-limit for any CSR project, among a series of other amendments introduced by the government.
The corporate social responsibility rules that came into effect from Friday have given time till April 1, 2021 to implementing agencies such as trusts and societies to register with the ministry of corporate affairs while also setting a three year time-limit for any CSR project, among a series of other amendments introduced by the government.
“It is a one-time registration in a simple single-page form where details of the members, PAN number etc has to be provided which can help us identify the implementing agencies on the MCA21 portal,” a senior government official told Business Standard.
This will also serve as a database of authentic implementation agencies and promote transparency in implementation of CSR activities, the senior official said.
While the national CSR fund which was meant to be created for unspent CSR funds has not been specified yet, all such money will be transferred to any of the schedule VII funds.
International organisations recognised under section 3 of the United Nations Privileges and Immunities Act, 1947 have also been allowed to undertake design monitoring, evaluation and capacity building work for CSR programmes in order to bring global best practices in this field.
Each CSR project would be given a unique registration number upon submission of the Form CSR-1 which can be used to track the project.
According to corporate affairs ministry data, CSR expenditure has increased from Rs 10,066 crore in FY 2014-15 to Rs 18,655 crore in 2018-19 with a cumulative total of Rs 79,000 crore having been spent throughout India.
The rules notified by the corporate affairs ministry have decriminalised the provision for CSR rules, but have increased disclosures for companies. Every company having average CSR obligation of Rs 10 crore or more in the three preceding financial years, will have to undertake an impact assessment study of its projects, through an independent agency.
Such as study has to be done for projects with an outlay of Rs 1 crore or more, and which have been completed not less than one year before the impact study.
The board has to ensure that the administrative overheads of CSR activity do not exceed five percent of total CSR expenditure of the company for the financial year. Any surplus arising out of the CSR activities will also not form part of the business profit of a company and be ploughed back into the same project or transferred to the Unspent CSR Account.
Companies are also allowed to create or acquire capital assets through CSR in the name of beneficiaries or a public authority or registered trust, society or section 8 company. This has been done in line with sustainable development goals which talk about building partnerships.
The company’s board has to mandatorily disclose the composition of the CSR Committee, and CSR policy and projects on their website for public access. Companies with CSR liability of less than Rs 50 lakh will not have to form a CSR committee. “For smaller companies we want to ease the burden of CSR compliances.”
The ministry had set up a high-level committee on CSR in 2018 chaired by then secretary, corporate affairs Injeti Srinivas. “The amendments to law aim to strengthen the CSR ecosystem, by improving and strengthening disclosures and by simplifying compliances. It also aims to address the inadequacies of the present CSR architecture by removing ambiguities, bringing in objectivity, and by simplifying language,” the corporate affairs ministry said.