New Delhi: Allaying industry concerns, Finance Minister Nirmala Sitharaman on Friday said violations of CSR norms under the companies law will be treated only as civil liability and not as a criminal offence.
The corporate affairs ministry would review the sections concerned under the Companies Act, she said.
The industry has expressed concerns over penal provisions for non-compliance with Corporate Social Responsibility (CSR) requirements in the amended Companies Act, 2013.
Addressing the media on measures to boost the economy, Sitharaman said the government respects and honours wealth creators.
“CSR violations… not be treated as a criminal offence and will be a civil liability,” Sitharaman, who holds also the charge of the corporate affairs ministry, said.
The government has provided companies through revised orders more time for completing ongoing projects as part of their CSR obligations.
Under the Act, a certain class of profitable companies are required to shell out at least two per cent of their three-year annual average net profit towards CSR activities.
To address concerns over alleged harassment of taxpayers, Sitharaman said it has been decided that from October 1, all notices, summons, and orders of the Income Tax Department would be issued through a centralised computer system and would also have a computer-generated unique document identification number.
The industry was shocked by the finance minister’s decision to punish firms that spent less than the expected amount on CSR when the Companies (Amendment) Bill 2019 proposed that any unspent annual CSR funds should be transferred to a specified government fund within six months of the financial year. That was because companies in India were turning socially responsible anyway, with the cumulative CSR spending by the 100 firms under review increasing to Rs 7,215.9 crore in the last financial year, 41% over the previous three years.
Consulting firm KPMG in its survey of 2018 had pointed out that over 22 companies had committed a higher corporate social responsibility CSR budget outlay in the financial year 2017-18, compared to 10 in 2014-15. The number of companies that had spent less than the prescribed 2% CSR budget has also substantially come down by 29%.