Corporate social responsibility (CSR) spending performance of companies is about to return under scrutiny from 1st April 2022, when the primary cycle of reporting under the new penalty regime gets completed, said an individual with knowledge of the matter. The maturity for reporting CSR compliance during a new format introduced in February is that the end of March after the penalty provision for defaulting on spending obligation came into effect in January 2021.
The filings are going to be reviewed once the reporting cycle is over. The penalty under the new regime could go up to ₹1 crore for companies and ₹2 lakh for every defaulting offence. The government has also given businesses the pliability within the new regime to spend quite their obligation—2% of net profits—which might be adjusted against future spending obligations.
Official data showed that around 8,300 businesses spent ₹20,360 crore in over 25,000 CSR projects in FY21, led by Reliance Industries Ltd, Tata Consultancy Services Ltd, Tata Sons Pvt. Ltd, HDFC Bank Ltd, Oil and gas Corp. Ltd and Indian Oil Corp. Ltd.
Experts said that the new reporting requirement—electronic form CSR-2—is designed to raised capture how companies are performing during this area and facilitate data processing for policy interventions. CSR-2 form is detailed and involves information on the CSR committees formed by businesses, its members and therefore the welfare projects undertaken. Businesses cannot escape the mandatory spending obligation within the new penalty regime. Unspent amounts need to be transferred to designated accounts. it’s an honest disclosure framework which will help both the businesses and therefore the government.
The penalty provision was introduced, replacing an imprisonment provision for defaults that was never given effect thanks to protests from the industry. The proposed scrutiny of CSR returns signifies the government’s intention to enforce the CSR obligations of profit-making businesses in order that they contribute to society and therefore the community besides generating wealth for shareholders.
The key change within the new regulatory regime of CSR spending is that defaulting firms and officers may face monetary penalties, unlike within the earlier regime during which businesses could escape with explaining why they might not spend the quantity as needed under the law. After the primary reporting cycle, defaulting businesses are going to be held accountable. It’s not a challenge for firms to satisfy this reporting requirement, except perhaps for a few entities which will have recently started making a profit and have come under CSR obligation for the primary time. The CSR regulatory regime is straightforward, and there’s not much scope for litigation on this front.
