West Bengal, Kerala etc. Seeking Clarity On CSR Classification Write To Finance Minister

New Delhi: In a yet another issue troubling the relation of states and union territories with the central government, states have approached Finance & Corporate Affairs Minister Nirmala Sitharaman to classify donations under CM Relief fund for COVID-19 as Corporate Social Responsibility (CSR) status for the donors.

CNBC-TV18 has learnt that West Bengal, Kerala, Puducherry, Rajasthan, to name a few, have not just communicated informally but have also written to Sitharaman urging her to provide clarity soon.

The states and UTs had raised this matter with Prime Minister Narendra Modi during a video conference on April 11.

Government sources say that the latest communication has come from West Bengal Finance Minister Amit Mitra today. Mitra has written that the recent FAQs issued by the Ministry of Corporate Affairs (MCA) on April 10 have created confusion for the donors.

MCA, in the FAQs issued clarified that contribution to Chief Minister’s Relief Fund or Funds set up specifically by the states for COVID-19 Relief do not qualify as CSR.

Mitra has opposed this in the letter saying, “This will severely jeopardize the state’s effort to raise funds for fighting this catastrophic crisis of such a gigantic scale and magnitude.” He has also urged Sitharaman to, “advice the Ministry of Corporate Affairs to allot any contribution made to the Chief Minister’s Relief Fund or any dedicated fund set up exclusively for COVID-19 to qualify as admissible CSR expenditure for businesses.”

Earlier, on March 23, MCA had issued a circular, stating that “Spending of CSR funds for COVID-19 is eligible CSR activity”. However, on April 10, MCA issued a set of Frequently Asked Questions (FAQs) related to COVID-l9 and the CSR treatment. In question 2, mentioned in the FAQs, MCA clarified that contribution to Chief Minister’s Relief Fund or funds set up specifically by the State for COVID-19 relief do not qualify as CSR, which created the confusion.

Under the Companies Act, 2013, companies are mandatory to spend two percent of their profits on CSR activities. Recently, with PM Modi announcing PM-CARES Fund, government classified, donations made towards this fund can be considered as CSR activity.