Amendments to the Companies Act have made non-compliance with CSR norms a jailable offence for key officers of the company, apart from hefty fines up to ₹25 lakh on the company and ₹5 lakh on the officer in default.
Evolution of CSR
- It was first encouraged as a voluntary contribution by business
- 6 years ago it evolved into a co-option of the corporate sector to promote inclusiveness in society
- Now it has become an imposition
Issues with amendments
- The committee headed by the Corporate Affairs Secretary has proposed that non-compliance be decriminalised and made a civil offence. CSR is a means to partner corporates for social development and such penal provisions are not in harmony with the spirit of CSR.
- CSR should not be treated as another tax on businesses.
- The government should not micromanage and tie-down businesses with rules and regulations that impose a heavy compliance burden.
Problems with CSR
- Filings with the Ministry of Corporate Affairs show that in 2017-18, only a little over half of those liable to spend on CSR have filed reports.
- The average CSR spend by private companies was just ₹95 lakh compared to ₹9.40 crore for public sector units.
- Compliance will improve as corporates imbibe CSR culture fully.
- The committee’s suggestion to offer a tax break for expenses on CSR may incentivise companies to spend.
- It has also recommended that unspent CSR funds be transferred to an escrow account within 30 days of the end of the financial year.
CSR is not the main business of a company they should rightly be focusing their energies on the business rather than on social spending.