The Union Ministry of Corporate Affairs on Friday clarified that contributions made to the Chief Minister's Relief Fund or State Relief Fund for COVID-19 do not qualify as admissible CSR expenditure under the Companies Act, as they do not find mention in Schedule VII of the Act.
"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," the Ministry said.
The clarification has been issued pursuant to the Ministry receiving several representations from various stakeholders seeking clarifications on eligibility of CSR expenditure related to COVID-19 activities. Released in a FAQ format, the clarification further provides,
Contributions made to the PM CARES Fund shall qualify as CSR expenditure under item no (viii) of Schedule VII of the Companies Act, 2013.
Similarly, it has been intimated that contributions made to the State Disaster Management Authority to combat COVID-19 also qualify as CSR expenditure under item no (xii) of Schedule VII of the 2013.
Inter alia, the Ministry stated that payment of salary/ wages to employees and workers 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.
"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," the government said.
However it is clarified that subject to an explicit declaration by the Board of the company and due certification by the statutory auditor, 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.