Pursuant to Companies Act 2013, on 30th June 2014, MCA has notified Companies (Cost Records and Audit) Rules 2014. This rule has further been amended on 31st December 2014 vide Companies (Cost Records and Audit) Amendment Rules 2014.
From financial year 2014-15 onwards, maintenance of cost records, cost audit and appointment of cost auditor shall be in accordance to new amended Companies (Cost Records and Audit) Rules 2014.
As per the new Companies Act 2013 and rules, for the purpose of sub section (1) of section 148, every company including a foreign company as defined under clause 42 of section 2 of the Act, engaged in the production of the goods or providing services, specified in Tables A and B, having an overall turnover from all its products and services of Rs 35 crore or more during the immediately preceding financial year, shall include cost records for such products and services in their books of accounts.
This means, the applicability of maintenance of Cost Records shall be for those sectors which are mentioned in the Tables ‘A’ and ‘B’ to the Companies (Cost Records and Audit) Amendment Rules 2014. Companies fulfilling these criteria are required to maintain cost records.
Sectors and industries covered under Table A are regulated sectors and sectors or industries covered under Table B are non-regulated sectors.
Rule states that cost records are to be maintained in form CRA-1. CRA-1 has not specified any specific format to maintain cost records. Only principles as stated are required to be followed with respect to different cost elements like material costs, employee costs, direct expenses, repair and maintenance, fixed assets and depreciation, overheads, transportation costs etc.
In absence of specific format, it is open for companies to maintain cost accounting records to determine true and fair view of the cost of production, cost of sales and margin of the product or services.
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Rules Applicable from April 1, 2014 –Regulated Sectors |
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| SI No. | Industry /Sector/ Product/Service | Central Excise Tariff Act Heading (wherever applicable) |
| 1 | Telecommunication services made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature (other than broadcasting services) and regulated by the Telecom Regulatory Authority of India under the TelecomRegulatory Authority of India Act, 1997 (24 of 1997); | Not applicable |
| 2 | Generation, transmission, distribution and supply of electricity regulated by the relevant regulatory body or authority under the Electricity Act, 2003 (36 of 2003), other than for captive generation (referred to in the Electricity Rules, 2005); | ——————— |
| 3 | Petroleum products regulated by the Petroleum and Natural Gas Regulatory Board under the Petroleum and Natural Gas Regulatory Board Act, 2006 (19 of 2006); | 2709 to 2715; |
| 4 | Drugs and pharmaceuticals | 2901 to 2942; 3001 to 3006. |
| 5 | Fertilizers; | 3102 to 3105. |
| 6 | Sugar and industrial alcohol; | 1701; 1703; 2207 |
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Rules Applicable from April 1, 2014 –Non-Regulated Sectors
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| SI No. | Industry /Sector/ Product/Service | Central Excise Tariff Act Heading (wherever applicable) |
| 1 | Machinery and mechanical appliances used in defence, space and atomic energy sectors excluding any ancillary item or items;Explanation.–For the purposes of this sub-clause, any company which is engaged in any item or items supplied exclusively for use under this clause, shall be deemed to be covered under these rules. | 8401 to 8402; 8801 to 8805; 8901 to 8908 |
| 2 | Turbo jets and turbo propellers; | 8411 |
| 3 | Arms and ammunitions; | 3601 to 3603; 9301 to 9306. |
| 4 | Propellant powders; prepared explosives (other than propellant powders); safety fuses; detonating fuses; percussion or detonating caps; igniters; electric detonators; | 3601 to 3603 |
| 5 | Radar apparatus, radio navigational aid apparatus and radio remote control apparatus; | 8526 |
| 6 | Tanks and other armoured fighting vehicles, motorised, whether or not fitted with weapons and parts of such vehicles, that are funded (investment made in the company) to the extent of ninety percent or more by the Government or Government agencies; | 8710 |
| 7 | Port services of stevedoring, pilotage, hauling, mooring,re-mooring, hooking, measuring, loading and unloading services rendered by a Port in relation to a vessel or goods regulated by the Tariff Authority for Major Ports under section 111 of the Major Port Trusts Act, 1963 (38 of 1963); | Not applicable. |
| 8 | Aeronautical services of air traffic management, aircraft operations, ground safety services, ground handling, cargo facilities and supplying fuel rendered by airports and regulated by the Airports Economic Regulatory Authority under the Airports Economic Regulatory Authority of India Act, 2008 (27 of 2008); | Not applicable. |
| 9 | Steel; | 7201 to 7229; 7301 to 7326 |
| 10 | Roads and other infrastructure projects corresponding to para No.(1) (a) as specified in Schedule VI of the Companies Act, 2013; | Not applicable. |
| 11 | Rubber and allied products being regulated by the Rubber Board constituted under the Rubber Act, 1947 (XXIV of 1947) | 4001 to 4017 |
| 12 | Railway or tramway locomotives, rolling stock, railway or tramway fixtures and fittings, mechanical (including electro mechanical) traffic signalling equipment’s of all kind; | 8601 to 8608 |
| 13 | Cement; | 2523; 6811 to 6812 |
| 14 | Ores and Mineral Products; | 2502 to 2522; 2524 to 2526; 2528 to 2530; 2601 to 2617 |
| 15 | Mineral fuels (other than Petroleum), mineral oils etc.; | 2701 to 2708 |
| 16 | Base metals; | 7401 to 7403; 7405 to 7413; 7419; 7501 to 7508; 7601 to 7614; 7801 to 7802; 7804; 7806; 7901 to 7905; 7907; 8001; 8003; 8007; 8101 to 8113. |
| 17 | Inorganic chemicals, organic or inorganic compounds of precious metals, rare-earthmetals of radioactive elements or isotopes, and Organic Chemicals; | 2801 to 2853; 2901 to 2942; 3801 to 3807; 3402 to 3403; 3809 to 3824. |
| 18 | Jute and Jute Products; | 5303, 5310 |
| 19 | Edible Oil; | 1507 to 1518 |
| 20 | Construction Industry as per para No.(5) (a) as specified in Schedule VI of the Companies Act, 2013 (18 of 2013) | Not applicable. |
| 21 | Health services, namely functioning as or running hospitals, diagnostic centres, clinical centres or test laboratories; | Not applicable. |
| 22 | Education services, other than such similar services falling under philanthropy or as part of social spend which do not form part of any business. | Not applicable. |
| 23 | Production, import and supply or trading of following medical devices, namely: | |
| Cardiac Stents, Drug Eluting Stents, Catheters, Intra Ocular Lenses, Bone Cements, Heart Valves, Orthopaedic Implants, Internal Prosthetic Replacements, Scalp Vein Set, Deep Brain Stimulator, Ventricular peripheral Shud, Spinal Implants, Automatic Impalpable Cardiac Deflobillator, Pacemaker (temporary and permanent), patent ductus arteriosus, atrial septal defect and ventricular septal defect closure device, Cardiac Re-synchronize Therapy, Urethra Spinicture Devices, Sling male or female, Prostate occlusion device, Urethral Stents | 9018 to 9022 | |
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Rules Applicable from April 1, 2015 –Non-Regulated Sectors |
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| SI No. | Industry /Sector/ Product/Service | Central Excise Tariff Act Heading (wherever applicable) |
| 1 | Coffee and tea; | 0901 to 0902 |
| 2 | Milk powder; | 0402 |
| 3 | Insecticides; | 3808 |
| 4 | Plastics and Polymers; | 3901 to 3914; 3916 and 3921; 3925 |
| 5 | Tyres and Tubes; | 4011 to 4013 |
| 6 | Paper; | 4801 to 4802 |
| 7 | Textiles; | 5004 to 5007; 5106 to 5113; 5205 to 5212; 5303; 5310; 5401 to 5408; 5501 to 5516 |
| 8 | Glass; | 7003 to 7008, 7011, 7016 |
| 9 | Other machinery; | 8403 to 8487 |
| 10 | Electricals or electronic machinery; | 8501 to 8507; 8511 to 8512; 8514 to 8515; 8517; 8525 to 8536; 8538 to 8547. |
Exception to applicability of cost records to companies
Foreign companies having only liaison office in India and engaged in production, import and supply or trading of medical devices listed in Sl. 33 of Table B above are exempted.
Further, companies which are classified as a micro enterprise or a small enterprise including as per the turnover criteria under sub-section (9) of section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006) are also excluded from the purview of the Rules.
When Cost Audit is applicable to a Company – As per Companies Act 2013
Every company specified in the first table shall get its cost records audited if the overall annual turnover of the company from all its products and services during the immediately preceding financial year is Rs 50 crores or more and the aggregate turnover of the individual product or products or service or services for which cost records are required to be maintained under rule 3 is Rs 35 crore or more.
Every company specified in the second and third table shall get its cost records audited if the overall annual turnover of the company from all its products and services during the immediately preceding financial year is Rs 100 crore or more and the aggregate turnover of the individual product or products or service or services for which cost records are required to be maintained under rule 3 is Rs 35 crores or more.
The requirement of cost audit shall not apply to a company which is covered in rule 3 as discussed above, and-
- Whose revenue from exports, in foreign exchange, exceeds 75% of its total turnover; or
- Which is operating from a special economic zone
Is cost records are required to be maintained for company classified as SMALL enterprise in MSME act, inspite of having turnover of more than Rs. 35 crore
Does the cost Audit is applicable to chocolate manufacturing company?
Steel company is engaged in trading division for the current year due to changes in market conditions. what is the cost audit applicability for that company?
The company manufactured of Glass bottle and its turnover exceed INR 100 Crores , central Excise tariff code of our product 70109000.
hence the cost audit applicability of this company
Where the turnover of immediately preceding f.y. exceeded 100 crores, cost audit is applicable. Else cost records are to be maintained as the turnover exceed 35crores
The company manufactured Steel Product and its turnover 55 crores , hence cost audit applicability to this company? pls. info to me asap.
Is the company engaged in Trading only, but having its turnover above INR 35 crores required to maintain cost record ? The product in which it deals is fall in Tariff Heading.
yes.product covered under table A or B,whether it is manufacturing or trading if turnover is 35 crore or more.then cost accounting records to be maintained in CRA-1.
Quantitative Information,
Abridged Cost Statement,
Details of Materials Consumed,
Details of Utilities Consumed,
Details of Industry Specific Operating Expenses.
You need to maintain above in addition to few more
I started working in a paper industry as cost accountant but there are no records for its products so tell me what type of records are to maintain ..
useful