Companies see gain in CSR, want GST on initiatives removed: Report
New Delhi, December 7, 2022
Legally mandated measure seen helping business in improving labour productivity
Corporate social responsibility (CSR) helps improve productivity but companies want the Goods and Services Tax (GST) removed from the legally mandated practice, said a report on Wednesday.
"CSR initiatives that are promoting upskilling and reskilling are gaining momentum and translating the labour productivity improvements, in turn, helping boost economic growth. In addition to this, organizations that are creating CSR programs that are meaningful to their employees and aligned with the organization’s values can see direct links to achieving business goals," said the "GST Levy on CSR" report released by Teamlease Education Foundation.
"CSR programs are attracting new talent as well as retaining employees by keeping them engaged and stimulating productivity," it said.
Growing 14 per cent per annum in the last six years, 55 per cent of all CSR contributions in India came from manufacturing, automotive, power and energy, and financial services industries. The report said that six states--Andhra Pradesh, Delhi, Gujarat, Karnataka, Maharashtra, and Tamil Nadu--accounted for over one-third of total CSR spending in India in FY21.
As many as 97 per cent companies believe that GST hurts CSR activities. In 2014, India became the first country in the world to make CSR mandatory under the Companies Act, 2013.
Companies must spend "at least two per cent" of average net profits made during the three immediately preceding financial years on CSR.
The law does not mandate paying a direct GST on the 2 per cent CSR amount, but it must be paid on the goods and services bought or sold for various CSR activities. This might be for procuring cement, bricks and other materials for building schools or hospitals and other similar CSR activities. No input tax credit can be availed on such goods or services.
"A majority of India Inc feels that CSR activities should be predominately viewed with philanthropic spirit but the unequal levy of GST certainly makes it unjustified. 88 per cent of all firms surveyed are both aware of and opposed to the tax. Only 3 per cent of people are aware of and in favour of the GST levied on CSR initiatives," said Ramani Dathi, director of TeamLease Education.
[The Business Standard]