NEW DELHI, Feb 14: The Government has put in place a detailed disclosure framework for CSR spending by companies, with experts saying the move will help enhance transparency but at the same time, is also likely to increase the compliance burden.
Form CSR-2 (Report on Corporate Social Responsibility) has been notified by the corporate affairs ministry.
Under the Companies Act, 2013, certain class of profitable entities are required to shell out at least 2 per cent of their three-year annual average net profit towards CSR activities in a particular financial year.
The form requires companies concerned to provide details about the CSR amount spent against ongoing projects as well as those other than ongoing projects.
Other requirements include furnishing of details of amount spent on impact assessment and whether any capital assets have been created or acquired through CSR spent in a given financial year.
Akila Agrawal, Partner & Head – M&A at Cyril Amarchand Mangaldas, said the new form requires disclosures relating to CSR compliance.
“There is an overlap on what the company is already required to disclose on its website and in the board and annual reports. It appears to be an attempt not only to oversee compliance but also to collate data,” Agrawal said.
Pratiq Shah, Partner at Deloitte India, said that over the past few years, the spotlight over CSR spends has increased and this seems to be another step in that direction.
While it is likely to add some compliance burden to corporates, it will enhance the transparency and disclosures around CSR activities and provide better oversight, he noted.
“The web-form Addendum to AoC-4 CSR shall be filed as an independent form for FY 20-21 by all the companies that are required to carry out CSR activities as per the relevant rules or are voluntarily carrying out CSR activities,” the ministry said.
Companies having a net worth of at least Rs 500 crore or a minimum turnover of Rs 1,000 crore or net profit of Rs 5 crore or more during the immediately preceding financial year have to spend on CSR activities.
CSR provision under the companies law came into effect from April 1, 2014. (PTI)