Govt amends CSR norms to include R&D spends on vaccine, drugs related to COVID

Implying that the companies claiming CSR under this head will have to make special mention in the annual report and Board reports and the claim.

Also, this spend will have to be made in financial years 2020-21, 2021-22 and 2022-23 and the R&D should be carried out in collaboration with the government nominated institutes or organisations.

This amendment has come in after a detailed analysis based on special recommendations that were made to the MCA earlier in May by pharmaceutical and medical device manufacturers and government departments such as department of pharmaceuticals and health ministry.

As per the notification, the R&D projects funded by central and state governments or state-owned enterprises will qualify as CSR spending. The other institutions with which companies can partner include public funded universities, IITs, national laboratories, institutions under Indian Council of Agricultural Research (ICAR), Indian Council of Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR) and various other central ministries and departments that conduct research.

This list was expanded by way of an amendment to Schedule Seven of the Companies Act, also notified on Monday.

Companies with net worth of Rs500 crore or more, or a turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more, are required to spend 2 percent of their average net profit of the preceding three years on CSR activities.

“Given that more than half a dozen Indian companies are working on the Covid-19 vaccine, and people need to be incentivized to find ways and means to deal with the current situation, the Ministry of Corporate Affairs’ initiative to allow R&D expenditure incurred for new vaccine, drugs and medical devices to be part of CSR is a welcome measure,” Said Arvind Sharma, Partner, Shardul Amarchand Mangaldas & Co.

This is in line with the Ministry of Corporate Affairs’ earlier initiative that “…spending of CSR funds for COVID-19 is eligible CSR activity”.

“The recent CSR amendment on the R&D spend will significantly boost efforts of pharma companies to develop necessary vaccines, drugs and medical devices. In order to ensure a concerted effort, the GOIs stipulation that the aforesaid R&D spend will be allowed as a CSR expenditure seems justified," Sharma added.