CSR policy. Covid jabs to be treated as CSR activity

The Corporate Affairs Ministry (MCA) has now allowed companies to spend their CSR funds for Covid vaccination in a bid to boost the world’s largest inoculation drive. However, this comes with a rider that any such spends on employees and their families will not be treated as an eligible Corporate Social Responsibility activity.

In a clarificatory circular, the MCA said that spending CSR funds for Covid vaccination for persons other than employees and their families, is an eligible CSR activity under item (i) and item (xii) of Schedule VII of the Companies Act, 2013. Schedule VII lists activities eligible for CSR spends. While item (i) relates to promotion of health-care including preventive, item (xii) relates to disaster management.

Although the government had allowed companies to vaccinate employees at their premises, there was no legal clarity whether such spends can be considered as part of their CSR. The MCA has now made it clear that vaccination spends on employees and their families cannot be treated as a CSR activity.

Extension needed

Manu Varghese, Partner, White & Brief Advocates & Solicitors, said: “While this is an expected clarification from the Ministry on eligible spending of CSR for Covid, the MCA should have considered the spirit of CSR expenditure and the need of the hour and extended eligibility to expenditure on vaccination of employees and their families as well,”

Prasenjit Chakravarti, Partner, Khaitan & Co LLP, said this timely move demonstrates that the government is alive to the feedback it receives from various stakeholders as ramping up the vaccination drive is the need of the hour to tackle the ongoing pandemic.

Harish Kumar, Partner, L&L Partners, said: “While this CSR relaxation would further help corporates involve in nationwide vaccinations, non-availability of CSR benefit for vaccinations of employees/family members, prima facie, does not appear to be specifically restricted in law”.

In 2014, India became the second country (after Mauritius) to mandate CSR spend, by introducing specific provision in the company law. The new law requires companies to spend in a given financial year at least 2 per cent of their average net profits earned over the preceding three years.

Earlier tweaks

In January this year, the CSR Rules were further tweaked to, among other things, require companies to mandatorily spend their CSR obligations; transfer the unspent CSR amount at year end to government notified funds within six months; and, carry forward and set off in the next three financial years any amount in excess of the CSR obligation.

Since March last year, post the onset of the Covid pandemic, the MCA had come up with several initiatives on the CSR front. It had clarified in March 2020 that spending on Covid activities, including setting up makeshift hospitals or care facilities, will be eligible CSR activity.

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