Company Spending for COVID Vaccines Considered as CSR

The Ministry of Corporate Affairs (MCA) issued a circular stating that the company spending for COVID-19 vaccines is included under the list of eligible CSR (Corporate Social Responsibility) activities. Schedule VII of the Companies Act, 2013 lists the activities for which the company can spend its CSR funds.

However, the MCA clarified in the circular that it would not include the funds spent by the companies to vaccinate their employees and their families against COVID-19 under the list of CSR activities. The circular stated that the MCA would consider company funds spent on vaccination of individuals except for employees and their families as CSR expenditure.

The MCA had issued a circular last year stating that the companies can conduct vaccination drives for a wider group of people to fulfil their CSR obligations. Section 135 of the Companies Act, 2013 provides for CSR by the specified companies. The specified companies under Section 135 need to spend at least 2% of their average net profits earned during the previous three financial years for CSR in a financial year.

Under the Companies Act, every company with Rs.500 crore net worth, Rs.1,000 crore turnover, or Rs.5 crore net profit during the preceding financial year should constitute a Corporate Social Responsibility Committee to formulate the CSR policy expenditure and activity. 

The MCA circular stated that spending of funds for COVID-19 vaccination for individuals is eligible CSR activity under items (i) and (xii) of Schedule VII of the Companies Act. The CSR activity relating to promoting health care, including preventive health care in item (i) of Schedule VII, covers the COVID-19 vaccination drives conducted by the company other than for its employees and their family.

Similarly, the CSR activity relating to disaster management, including rehabilitation, relief and reconstruction activities in item (xii) of Schedule VII, includes funds spent by companies on COVID-19 vaccination for individuals. The companies need to undertake the CSR activities as per the Companies (CSR Policy) Rules, 2014 and the MCA circulars related to CSR. 

Though the government had allowed companies to conduct vaccination drives for employees at their premises, there was no clarification whether it would consider the spending on COVID-19 vaccines for employees as CSR activity. The MCA, through this circular, clarified whether the expenditure on vaccination for employees and their families is a CSR activity. 

The MCA will not consider the company spending on COVID-19 vaccines for its employees and families as a CSR activity. However, the company can conduct vaccination drives for larger groups and include that under their CSR expenditure for the financial year.

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