After a detailed review, the Ministry of Corporate Affairs (MCA) will soon prepare an action taken report on the high level panel's suggestions related to CSR norms.
The panel, chaired by former Home Secretary Anil Baijal, recently submitted its recommendations on the Corporate Social Responsibility (CSR) norms under the Companies Act, 2013.
Among others, it has called for uniform tax treatment for all CSR activities carried out under the Act and leniency towards non-compliant firms in the first 2-3 years of the law.
Sources said the Ministry has "largely accepted" the recommendations made by the panel.
After going through the suggestions in detail, the Ministry would soon prepare an action taken report and the same would be submitted to Corporate Affairs Minister Arun Jaitley.
Under the new companies law, certain class of profitable entities are required to shell out at least two per cent of their three-year annual average net profit towards CSR activities.
The first year of its implementation was last financial year (April 2014-March 2015) and the compliance reports in this regard would be available by end of this year.
Set up by the Ministry to suggest steps for improved monitoring of CSR spending, the panel had said differential tax treatment for expenditure on various CSR activities may create unforeseen distortion in allocation of funds across development sectors.
"The (company) board's decision could be guided more by tax savings implications rather than compelling community social needs. The committee therefore feels that there should be uniformity in tax treatment for CSR expenditure across all eligible activities," as per the panel.
At present, certain activities such as contribution to the Prime Minister's National Relief Fund qualify for tax exemption.
Besides, the committee recommended that leniency may be shown to non-compliant entities in "initial two/three years to enable them to graduate to a culture of compliance" since these years would be a period of learning for all the stakeholders.
Another suggestion was that the government should have no role to play in engaging external experts for monitoring the quality and efficacy of CSR expenditure of companies.
