Corporate affairs minister Nirmala Sitharaman has taken a detailed briefing from her officials on corporate social responsibility (CSR) issues as one of the key concerns of domestic industry.
“The ministry has issued the rules but still the questions on the mandatory CSR provision keep pouring in. This is one of the key areas which has consequently been flagged,” said a source in the corporate affairs ministry.
One of the options suggested by the officials was that the objections could be clipped if tax benefits were provided for spending on CSR. In the presentation about the key issues in the ministry made to the new minister, the department officials have pitched for tax break on CSR spend as defined in the new Companies Act.
With both the Cabinet minister and the minister of state holding portfolios of finance and corporate affairs, the department is hopeful that the issue will be resolved soon.
Union finance minister Arun Jaitley also holds the portfolio of corporate affairs while Sitharaman is also MoS finance. In the UPA regime, Sachin Pilot had raised the issue with the finance ministry but no action was taken.
According to Section 135 of the Companies Act, 2013, with effect from April 1, every public and private company, having a net worth of Rs 500 crore or a turnover of Rs 1,000 crore or net profit of Rs 5 crore, has to spend at least 2 per cent of its average net profit for the immediately preceding three financial years on CSR activities. The rules for the section have also been notified. The activities have been detailed in Schedule VII of the Act and include livelihood enhancement and rural development projects; protection of national heritage, art and culture; reducing inequalities faced by socially and economically backward groups and setting up homes and hostels for women and orphans among others.
Ministry officials said the provision per se is unlikely to be done away with, but a tax break could help reduce the tension.
Sitharaman also met Serious Fraud Investigation Office officials to discuss ongoing investigations.