India Inc may have to shell out about Rs 10,000 crore in the next financial year towards corporate social responsibility (CSR), if the proposed Companies Bill 2012 were to get enacted into law.
Indications are that the CSR provisions in the proposed Bill will be operationalised from April 1. The Companies Bill 2012, which seeks to replace the Companies Act 1956, was passed by the Lok Sabha during the Winter Session. The Rajya Sabha is expected to take up the Bill for passage in the early part of Budget Session in February.
Companies that have a turnover of over Rs 1,000 crore or have a net worth of Rs 500 crore or that have recorded a net profit of Rs 5 crore are expected to spend 2 per cent of their average net profits in preceding three financial years towards CSR, according to the provisions in the new Bill.
An estimated 2,500 companies fall into this category, based on their filings and disclosures to the Ministry of Corporate Affairs.
Based on this data, the quantum of money that would be available for CSR activities in the first yearwould be between Rs 9,000 crore and Rs 10,000 crore, said G.P.Madaan, Founder, Corporate Knowledge Foundation, at a conference on Companies Bill 2012.
While CSR spend is not being mandated, what is compulsory is the reporting on the spending to the Corporate Affairs Ministry, said Bhaskar Chatterjee, Director-General and CEO of the Indian Institute of Corporate Affairs. Companies that are not spending on CSR should explain why they are not doing so, he added.
Companies that do not report will face a penalty ranging from Rs 50,000 to Rs 25 lakh or even imprisonment of up to three years, according to Clause 134 (O) of the proposed Bill.
Corporate law experts say the Budget may see the Finance Ministry coming up with specific provisions to allow tax deduction on the CSR spends of companies.
“We are hopeful that specific provision for tax deductibility of CSR spends will be provided in next Budget. This is more so with Government pushing companies to undertake CSR spend,” said Pavan Kumar Vijay, Past President of the Institute of Company Secretaries of India.