Accounting regulator ICAI has formed an advisory committee of chartered accountants to help corporates identify social sector projects on which they would be required to spend two% of their net profit. The Public Advisory Committee, of the Institute of Chartered Accountants of India (ICAI), has been set up with the view to protect public interest, said the newly-appointed ICAI President G Ramaswamy.
“We have formed a Public Advisory Committee with the view to help public interest.. Even for the CSR… A good viable project will be identified by ICAI and we will play the role of an advisory between the corporates and the public,” he told PTI.
He said that it would advice companies to take up corporate social responsibility (CSR) projects specific to the industry they belongs to.
“For example, companies in the chemical industry could take up CSR projects related to environment protection. That way it will provide a balance,” he said.
The Companies Bill, 2009, has proposed that companies should earmark two% of the average profit of the preceding three years for CSR activities, and make a disclosure to shareholders about the policy adopted in the process.
Industry has been of the view that they should be allowed to monitor implementation of CSR themselves without the government intervention, which the government has accepted.
The suggestion for earmarking a part of a company’s profit for CSR was floated by the Parliamentary Standing Committee on Finance, which scrutinised the Companies Bill, 2009.
Subsequently, the MCA proposed that “every company having (net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more) or (a net profit of Rs 5 crore or more during a year) shall be required to formulate a CSR Policy … As may be approved and specified by the company.”
While PSUs whose net profit is less than Rs 100 crore have to contribute 3-5% of their bottomline for CSR, PSUs with profits between Rs 100-500 crore will earmark 2-3%.
In case of public sector companies earning a profit of Rs 500 crore and above, CSR spending should be between 0.5 to 2% of the net profit.