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R&D push: CSR booster dose for Covid-related vaccine and drug research

The Hindu Business Line |

25 August 2020

MCA allows R&D spend on Covid-19 vaccine, drugs to be adjusted against CSR obligations

Companies engaged in research and development activities for new vaccines and drugs in their normal course of business have yet another reason to spend more on development of Covid-19 related vaccine, drugs and medical devices with the Corporate Affairs Ministry (MCA) allowing such expenses to be treated as Corporate Social Responsibility (CSR).

Soon after the Covid-19 outbreak in March, the MCA had announced that spending of CSR funds for Covid-19 would be treated as eligible CSR activity. Now, it has gone a step further to even treat the R&D spend on Covid-19 vaccines, drugs and medical devices as eligible CSR spend.

The MCA has amended the CSR Rules 2014 to allow such companies to bring R&D spends on new vaccine, drugs and medical devices development for the financial years of 2020-21, 2021-22 and 2022-23 as part of their ‘CSR policy’. In effect, such spends can be considered as ‘CSR activity’ so long as certain conditions are met, the MCA has said.

List of organisations

The change in norm stipulates that research on Covid-19 vaccine, drugs and medical devices will have to be undertaken in collaboration with organisations mentioned in Companies Act 2013, which prescribed the list of permitted CSR activities. These organisations include Indian Institute of Technology; Indian Council of Medical Research ; Indian Council of Agricultural Research; Council of Scientific and Industrial Research; and laboratories and autonomous bodies established under Department of Atomic Energy; Department of Biotechnology; Department of Science and Technology; Department of Pharmaceuticals and Ministry of AYUSH.

Also, companies engaging in R&D spend on Covid-19 vaccines and collaborating with the specified government organisations will have to separately disclose the details of such activity in the Annual Report on CSR included in the Board’s report, the MCA has now said.

Harish Kumar, Partner, L&L Partners, said the amendment would provide necessary fiscal relief to companies engaged in research activities for development of Covid-19 vaccine as they would be able to adjust their research related expenses towards their CSR obligation.

Partner & Leader — Transaction Tax, BDO India, said: “Considering the huge investment that goes into R&D for any scientific research, the amendment should provide some financial respite to these companies.”

Schedule VII of Companies Act amended

The MCA has also now amended Schedule VII of Companies Act to specifically provide that contributions towards research and development projects in the fields of science and technology, engineering and medicine, funded by Centre or State Governments or public sector undertakings or any agency of Central or State Government will be counted as eligible ‘CSR spend’.

Aseem Chawla, Managing Partner, ASC Legal, a law firm, said: “The latest MCA initiative would assist in garnering and deploying of funds for this much critical cause. It is equally imperative that a beneficial interpretation is adopted by authorities to the same.”