GST on CSR Spending Hampering Social Initiatives

Published on November 6, 2023 by

NGOs dependent on corporate social responsibility funds say they are less effective than before


Non-governmental Organizations (NGOs) say they are concerned that the 18 percent goods and services tax (GST) on ‘corporate social responsibility’ (CSR) expenditure for companies is affecting their projects. Ground workers say in a situation where the communities’ needs are increasing everyday, even that 18 percent is a big blow to most organizations. 

CSR professionals say that limited grant funding, that is, grants given by companies after paying GST, affects the quality of the work. Due to this, they have to engage in other ways to generate funding. Revanshi Agrawal, CSR customer relations manager at U&I Trust explains, “We actually reduce the number of kids we are supporting and when we do that of course the reach is lower. Because of this, we have to figure out other ways of generating funds, but it becomes very tricky because you need so much more bandwidth to be able to do that.

Also, it’s not just the program that gets affected; it’s also the people who work towards executing the program because you can’t hire a lot of people with only a limited fund. So, the quality of the work gets affected in a lot of ways.” She says that social work doesn’t stop due to limited funding, but its intensity and reach reduces hence impacting its significance. 

A 2022 survey report by TeamLease Edtech says after the levy of GST, the impact of CSR activities has been affected in case of a majority (83 percent) of the businesses surveyed. The report also says that majority (80 percent) businesses assert that GST should not be levied on CSR activities since such a levy is detrimental to activity levels of the social work. 

India Cares Foundation says while companies give two percent of their net profit to the CSR, they also have to pay an 18 percent GST on the goods and supplies they buy to execute their social project. This affects the overall grant funding provided to NGOs to run the project, “Where you were doing work for ‘x’ number of people, now you are doing work for much lesser number of people, like say 25 percent or it is 18 percent lesser than what it would be otherwise, because the CSR budget can’t change but within the two percent, if they remove that 18 percent then where we used it for actual ground work, now that much will reduce,” says Meena Dave, CEO of India Cares. She further says that this is an issue since there are strict rules related to NGO fundings as well.

Financial experts say this is an additional tax on companies since they anyway have to pay a corporate tax on their profits. CSR in India is a result of the 2013, Companies Act. In a list of 30 activities mentioned on the government CSR website, some of the major ones are healthcare, rural development projects, education, and skill development. 

India is the first country to make CSR mandatory for qualifying companies. Ground workers say reducing the amount of GST imposition from 18 percent might help the case.


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