MCA states that setting up of makeshift hospitals is an eligible CSR activity

The Ministry of Corporate Affairs (MCA) issued a notification on Thursday that allows spending of company CSR funds for setting up makeshift hospitals and temporary COVID care facilities. The MCA has been added to the list of activities that are considered eligible CSR activities. The companies have to spend their CSR funds only on the activities specified by the MCA as eligible CSR activities under Schedule VII of the Companies Act, 2013.

Earlier, on 23 March 2020, the MCA clarified that eligible CSR activities include spending funds for COVID-19 activities. On 22 January 2021, the MCA issued an order clarifying that companies spending funds on public outreach programmes and awareness campaigns for promoting vaccination against COVID-19 will be considered under eligible CSR activities.

The MCA stated that providing makeshift hospitals and temporary COVID facilities are eligible CSR activities under Schedule VII (i) and (xii) of the Companies Act, 2013. Schedule VII (i) provides the first CSR activity upon which the companies can spend their CSR funds. Schedule VII (i) states that eradicating poverty and malnutrition, hunger, promoting health care, including preventive health care, making available safe drinking water and sanitation are eligible CSR activities. 

The MCA has stated that the CSR funds used to promote health care, including preventive health care under Schedule VII (i), now include setting up COVID care facilities and makeshift hospitals. The MCA also included the activities of COVID care facilities under Schedule VII (xii), which provides spending of CSR funds for disaster management, including rehabilitation, relief and reconstruction activities.

The companies need to undertake CSR activities in consultation with the State Governments subject to fulfilment of the Companies (CSR Policy) Rules, 2014. They need to undertake activities as per the circulars related to CSR issued by MCA from time to time.

However, the central government stated that it was reluctant to give companies permission to classify their employee vaccination under CSR funds or use the CSR funds exclusively for employee inoculation. But, the government said that it might consider company spending as CSR activity if there is the involvement of the larger community in their vaccination drive.

The rampant jump in daily new cases of COVID-19 has led to a shortage of beds, oxygen cylinders and medicines. As a result, the vaccination drive is also slowing down because of the constraints in the manufacturing capacity. At such a time, the government is seeking help from corporations to increase the oxygen production for patients. The MCA has appealed to the corporates to help the government in COVID-19 activities to tackle the second wave in India.

Considering the pandemic situation in the country, allowing the companies to spend their CSR funds for setting up makeshift hospitals and COVID care facilities is a good move by the government. With the help of the companies, the government burden will be reduced, and it will speed up the process of preventing and controlling the COVID-19 pandemic.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in

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