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Rules governing maintenance of cost accounting records and cost audit as per Section 148 of the Companies Act, 2013:

The Central Government issued Companies (Cost Records and Audit) Rules, 2014 on June 30, 2014.

Subsequently, various amendments are carried out in the above rules as enumerated below from time to time till date:

1. The Companies (Cost Records and Audit) Amendment Rules, 2014 dated 31/12/2014

This amendment brought the changes as pointed below:

i. Definition of Central excise tariff heading given

ii. Rule 3 – Application of cost records substituted – Table A and Table B added

iii. Rule 4 – Applicability of cost audit substituted – Table A and Table referred

iv. Proviso to Rule 5(1) inserted.

v. Rule 6(3A) inserted – to give the provision to fill the casual vacancy within 30 days.

vi. Rule 7 (Rules not to apply in certain cases) omitted

vii. Form CRA-1 and CRA 3 substituted

2. The Companies (cost records and audit) (Amendment) Rules, 2015 dated 12/06/2015

This amendment brought the changes as pointed below:

i. Amendment in CRA-2 & CRA-4

3. The Companies (cost records and audit) (Amendment) Rules, 2015 dated 14/12/2015

This amendment brought the changes as pointed below:

i. Rule 13 of The Companies (Cost Records and Audit) Rules, 2014 was substituted with new clause

4. The Companies (cost records and audit) (Amendment) Rules, 2016 dated 14.07.2016

This amendment brought the changes as pointed below:

i. Definition of cost audit Report is substituted with the new one

ii. Table A and Table B given under Rule 3 are substituted.

iii. Rule 4(3)(iii) is inserted to include captive generation plant.

iv. proviso to Rule 6 (1) written consent of the cost auditor is required to be obtained

v. Rule 6(1A) inserted to include certificate from cost auditor in terms of section 141

vi. Proviso to Rule 6 (3)inserted for removal of cost auditor before expiry of term

vii. Rule 6(3B) inserted to include approval of Board of directors for the cost statements and annexures of cost audit report before signed on behalf of board.

viii. Rule 6(5) substituted for providing that cost audit report shall be submitted to board within 180 days from closure of FY.

ix. Rule 6(6) substituted to provide filing of cost audit report in form CRA-4-XBRL within 30 days of receipt

Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 (by considering various amendments as mentioned above) are applicable and governs the maintenance of cost accounting records and cost audit.

MAINTENANCE OF COST RECORDS:

The Rule 3 has classified sectors under Regulated and Non-Regulated sectors.

The sectors covered under Table A are under the Regulated Sector and sectors covered under Table B are under the Non-Regulated Sector.

Every company engaged in the production of the goods or providing services, specified in Tables (Table A – Regulated sectors and Table B – Non-regulated Sectors), having an overall turnover from all its products and services of Rupees thirty five crore or more during the immediately preceding financial year, shall include cost records for such products or services in their books of account.

This means that applicability of maintenance of Cost Records shall be for those sectors which are mentioned in the tables (Table A – Regulated sectors and Table B – Non-regulated Sectors) to the Companies (Cost Record and Audit) Amendment Rules 2016 dated 14.07.2016.

For any company to fall under the applicability of maintenance of Cost records:

a. Coverage under Table – A and / or Table – B.

Company’s product / services shall fall under one or more categories given under Table A and / or Table B. AND the respective Central Excise Tariff Act (CETA) headings (wherever applicable).

b. Turnover:

Company’s overall turnover from all its products and / or services (from the products / services as mentioned above) shall be Rupees thirty five crore or more during the immediately preceding financial year.

If both of the above tests are passed by the Company, provisions for maintenance of cost records apply.

Provided that nothing contained above shall apply to a company which is classified as 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 Act, 2006.

COST AUDIT:

Rule 4states that cost audit would be applicable to a company if the classification of company falls under Industry / Sector / Product / Service provided in Table A or Table B and:

(a) Overall annual turnover from all products / services is of Rs. 50 crore or more and aggregate turnover from individual product / services for which cost records are required to be maintained is Rs. 25 crore or more – if the classification falls under Table A, and

(b) Overall annual turnover from all products / services is of Rs. 100 crore or more and aggregate turnover from individual product / services for which cost records are required to be maintained is Rs. 35 crore or more – if the classification falls under Table B.

This means that Cost Audit shall be applicable to those companies whose products / services falls under the sectors which are mentioned in the tables (Table A – Regulated sectors and Table B – Non-regulated Sectors) to the Companies (Cost Record and Audit) Amendment Rules 2016 dated 14.07.2016.

For any company to fall under the requirement of Cost Audit following two tests shall apply:

a. Coverage under Table – A and / or Table – B.

Company’s product / services shall fall under one or more categories given under Table A and / or Table B. AND the respective Central Excise Tariff Act (CETA) headings (wherever applicable).

b. Turnover:

(i) If the products or services of the company falls under Table A – Regulated sectors:

Overall annual turnover from all products and /or services is Rs. 50 crore or more AND aggregate turnover from individual product or services for which cost records are required to be maintained is Rs. 25 crore or more, during the immediately preceding financial year;

(ii) If the products or services of the company falls under Table B – Non-regulated Sectors:Overall annual turnover from all products and / or services is Rs. 100 crore or more AND aggregate turnover from individual product or services for which cost records are required to be maintained is Rs. 35 crore or more, during the immediately preceding financial year.

Exemption from applicability of Cost audit:

The requirement of Cost Audit under these rules shall not apply to a company which is covered in Rule 3, and –

i. whose revenue from exports, in foreign exchange, exceeds 75% of its total revenue; or

ii. which is operating from a special economic zone.

Reference for Tariff heading:

http://www.cbec.gov.in/htdocs-cbec/excise/cxt2015-16/cxt-1516-idx

Disclaimer:

The entire contents of this article have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts made to provide authentic information, it is suggested to cross-check the relevant sections, rules under the Companies Act, 2013for better understanding.

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Category : Company Law (2996)
Type : Articles (10773)
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