MCA Circular- What qualifies? What not? - COVID-19 related Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR)

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In continuation to  initiatives of the government with respect to the existence pandemic of COVID-19 in the country, a series of active steps have been taken by the government to combat the persisting threat of COVID-19 over the country.  Ministry has already issued circular regarding clarification for contributing towards PM Cares Fund will qualify as CSR. Since there were many question regarding contribution to other Government fund will qualify as CSR or not? 

The Ministry has been receiving several references/ representations from various stakeholders seeking clarifications on eligibility of CSR expenditure related to COVID-19 activities. In this regard, a set of FAQs along with clarifications are provided below for better understanding of the stakeholders:


Contribution Qualify as CSR Expenditure

Contribution not Qualify as CSR Expenditure
1. CONTRIBUTION MADE TO ‘PM CARES FUND’

Contribution made to ‘PM CARES Fund’ shall qualify as CSR expenditure under item no (viii) of Schedule VII of the Companies Act, 2013 and it has been further clarified vide Office memorandum F. No. CSR-05/1/2020-CSR-MCA dated 28th March, 2020.

2. CONTRIBUTION MADE TO STATE DISASTER MANAGEMENT AUTHORITY

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 2013 and clarified vide general circular No. 10/2020 dated 23rd March, 2020.

3. SPENDING OF CSR FUNDS FOR COVID-19 RELATED ACTIVITIES

Ministry vide general circular No. 10/2020 dated 23rd March, 2020 has clarified that spending CSR funds for COVID-19 related activities shall qualify as CSR expenditure. It is further clarified that funds may be spent for various activities related to COVID-19 under items nos. (i) and (xii) of Schedule VII relating to promotion of health care including preventive health care and sanitation, and disaster management. Further, as per general circular No. 21/2014 dated 18.06.2014, items in Schedule VII are broad based and may be interpreted liberally for this purpose.

4. WHETHER PAYMENT OF EXGRATIA TO TEMPORARY /CASUAL /DAILY WAGE WORKERS

If any ex-gratia payment is made to temporary / casual workers/ daily wage workers over and above the disbursement of wages, specifically for the purpose of fighting COVID 19, the same shall be admissible towards CSR expenditure as a onetime exception provided there is an explicit declaration to that effect by the Board of the company, which is duly certified by the statutory auditor.
1. ‘CHIEF MINISTER’S RELIEF FUNDS’ OR ‘STATE RELIEF FUND

‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ is not included in Schedule VII of the Companies Act, 2013 and therefore any contribution to such funds shall not qualify as admissible CSR expenditure.

2. PAYMENT OF SALARY/WAGES TO EMPLOYEES AND WORKERS, INCLUDING CONTRACT LABOUR, DURING THE LOCKDOWN PERIOD

Payment of salary/ wages in normal circumstances is a contractual and statutory obligation of the company. Similarly, 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. Thus, 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.

3. PAYMENT OF WAGES MADE TO CASUAL /DAILY WAGE WORKERS DURING THE LOCKDOWN PERIOD

Payment of wages to temporary or casual or daily wage workers during the lockdown period is part of the moral/ humanitarian/ contractual obligations of the company and is applicable to all companies irrespective of whether they have any legal obligation for CSR contribution under section 135 of the Companies Act 2013. Hence, payment of wages to temporary or casual or daily wage workers during the lockdown period shall not count towards CSR expenditure.


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