Experts are calling on the government to ease CSR regulations to allow corporate expenditure on vaccinations for employees and treatment of employees suffering from Covid to be covered under spending for corporate social responsibility (CSR). Companies are not permitted to count expenditure incurred exclusively for the welfare of employees as part of their mandatory CSR expenditure under current CSR norms.
Companies with a minimum net worth of Rs 500 crore, turnover of Rs 1,000 crore, or net profit of Rs 5 crore are required to spend at least 2 per cent of their average profit for the previous three years on CSR activities every year.
The Centre has already made numerous changes in CSR norms over the past year to allow corporates to count expenditure towards curbing the spread of Covid-19, including their spending on Covid vaccine awareness and donations to the PM-CARES fund as CSR expenditure.
Devesh Prakash, partner at EY, said, “Corporate India is doing a lot to support employees, so their expectation is that the (CSR) definition is expanded to include employee vaccination,” adding that such a move would improve the reach of the vaccination drive in a shorter time frame and boost vaccinations for unorganised labour in the manufacturing sector.
Manu Varghese, partner at law firm White and Brief, noted that allowing companies to count makeshift Covid facilities only for their employees would also benefit the overburdened healthcare system in general and should be counted towards CSR expenditure. The Centre recently clarified that the expenditure incurred by a company on setting up of makeshift hospitals and Covid facilities would also count towards their mandatory CSR expenditure.
“By providing makeshift hospital facilities and covering medical expenses of their employees, companies will reduce the heavy burden on existing critical Covid infrastructure, thereby benefiting the public at large. The government should consider clarifying that expenditure towards employees will also be counted towards CSR expenditure, so long as there is proper audit and documentation for the expenses incurred,” Varghese added.
Harish Kumar, partner at law firm L&L partners, said the Centre should clarify whether companies incurring scientific research expenditure on Covid-19 vaccination and treatments under their CSR expenditure would be allowed to avail income tax benefits on the same.
The government had last year permitted drug makers to classify research and development expenditure on therapies for Covid-19 as CSR expenditure, but corporations are not permitted to claim tax benefits on CSR expenditure under current rules.
However, the Income-tax Act allows companies to deduct all expenditure incurred on scientific research in a given year from their taxable profits.