How Expanding Scope Of CSR Will Help Start-up Ecosystem
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Apart from reduced basic corporate tax rate for domestic companies, Finance Minister Nirmala Sitharaman also announced the increased scope of corporate social responsibility (CSR) spending of 2 per cent. “Now CSR 2 per cent fund can be spent on incubators funded by Central or State Government or any agency or public sector undertaking of central or state government,” Sitharaman announced on Friday.
According to the official statement, CSR can be spent on incubators which (that) are “making contributions to public funded universities, IITs, national laboratories and autonomous bodies (established under the auspices of ICAR, ICMR, CSIR, DAE, DRDO, DST, Ministry of Electronics and Information Technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting SDGs”.
The move has been welcomed by the industry as they believe that this would help in boosting research and development. “Changes in CSR contributions and the relief on buy-back tax will address past concerns and help in channelling funds towards R&D initiatives,” said Frank D'Souza Partner and Leader, Corporate and International Tax, PwC India.
What Is CSR?
According to the Companies Act, 2013, CSR has been defined as “corporate initiative to assess and take responsibility for the company's effects on the environment and impact on social welfare”.
CSR, which came into effect from 2014, is applicable on companies with a net worth of over INR 500 crore or turnover of over INR 1000 crore or record net profit over INR 5 crore during any financial year. These companies are required to spend 2 per cent of the profits on CSR programmes.
"CSR is the process by which an organization thinks about and evolves its relationships with stakeholders for the common good, and demonstrates its commitment in this regard by adoption of appropriate business processes and strategies. Thus CSR is not charity or mere donations. CSR is a way of conducting business, by which corporate entities visibly contribute to the social good. Socially responsible companies do not limit themselves to using resources to engage in activities that increase only their profits. They use CSR to integrate economic, environmental and social objectives with the company's operations and growth," the CSR policy notes.
The Move Will Help In R&D Growth: Industry
While speaking with Entrepreneur Media, Bharti Foundation CEO, Mamta Saikia explained that the move will help in developing and promoting research. “I believe research and incubation will give it a positive impetus to students and those who are looking to startup at incubators,” Saikia said.
Similar point was raised by Ninad Karpe, Partner at 100X.VC and CEO & Founder of KARPE DIEM Consulting. According to Karpe, the move recognises the importance of innovation. “This a true game changer and a turning point for funding for incubators. It recognizes the fact that innovation is critical for India with the incubators playing an important role and it needs support from the CSR spend bucket," Karpe said.