This Article is an effort to explain the provisions related to provisions of Cost Records & Audit under Companies Act, 2013 and Rules thereto.
1. DEFINITIONS
a) Cost Accountant means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act;
b) Cost Accountant in practice means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959), who holds a valid certificate of practice under sub-section (1) of section 6 of that Act and who is deemed to be in practice under sub-section (2) of section 2 thereof, and includes a firm or limited liability partnership of cost accountants;
c) cost auditor means a Cost Accountant in practice, as defined in clause (b), who is appointed by the Board;
d) cost audit report means the duly signed cost auditor’s report on the cost records examined and cost statements which are prepared as per these rules, including attachment, annexure, qualifications or observations attached with or included in such report
e) cost records means books of account relating to utilisation of materials, labour and other items of cost as applicable to the production of goods or provision of services as provided in section 148 of the Act and these rules;
f) Cost Audit: If the Central Government is of the opinion, that it is necessary to do so, it may, by order, direct that the audit of cost records of class of companies, which are covered under sub-section (1) and which have a net worth of such amount as may be prescribed or a turnover of such amount as may be prescribed, shall be conducted in the manner specified in the order.
g) Cost Records: The Central Government may, by order, in respect of such class of companies engaged in the production of such goods or providing such services as may be prescribed, direct that particulars relating to the utilisation of material or labour or to other items of cost as may be prescribed shall also be included in the books of account kept by that class of companies
2. PROVISIONS RELATING TO COST RECORDS
a) Every company shall maintain cost records in form CRA-1.
b) The cost records shall be maintained on regular basis in such manner as to facilitate calculation of per unit cost of production or cost of operations, cost of sales and margin for each of its products and activities for every financial year on monthly or quarterly or half-yearly or annual basis.
c) The cost records shall be maintained to exercise, as far as possible, control over the various operations and costs to achieve optimum economies in utilisation of resources and these records shall also provide necessary data which is required to be furnished under these rules.
Applicability: The Company is engaged in the production of the goods or providing services, specified in the tables and have 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.
Exception: Nothing contained in this rule shall apply to a company which is 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)].
3. PROVISIONS RELATING TO COST AUDIT
a) Cost Audit shall be done by a Cost Accountant
b) Consent Letter and Eligibility Certificate shall be taken from the Cost Auditor
c) No person appointed under section 139 as an auditor of the company shall be appointed for conducting the audit of cost records:
d) Cost Auditor shall be appointed by the Board within 180 days from the commencement of financial year.
e) Every company file a notice of such appointment within a period of 30 days of the Board meeting in which such appointment is made or within a period of 180 days of the commencement of the financial year, whichever is earlier, through electronic mode, in #Form CRA-2
f) Remuneration of Cost Accountant shall be determined by the Members
g) The cost statements, including other statements to be annexed to the cost audit report, shall be approved by the Board of Directors before they are signed on behalf of the Board by any of the director authorized by the Board, for submission to the cost auditor to report thereon”.
h) The report on the audit of cost records shall be submitted by the cost accountant to the Board of Directors of the company within a period of one hundred and eighty days from the closure of the financial year to which the report relates and the Board of Directors shall consider and examine such report, particularly any reservation or qualification contained therein.
i) A company shall within thirty days from the date of receipt of a copy of the cost audit report shall furnish the Central Government with such report along with full information and explanation on every reservation or qualification contained therein.
j) Every cost auditor appointed as such shall continue in such capacity till the expiry of 180 days from the closure of the financial year or submission of cost audit report, for the financial year for which he has been appointed.
Applicability.
4. Applicability for Cost Audit:-
(1) Every company specified in item (A) of rule 3 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 rupees fifty crore or more and the aggregate turnover of the individual product or products or services for which cost records are required to be maintained under rule 3 is rupees twenty five crore or more.
(2) Every company specified in item (B) of rule 3 shall get its cost records audited in accordance with these rules if the overall annual turnover of the company from all its products and services during the immediately preceding financial year is rupees one hundred 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 rupees thirty five crore or more.
Exception: The requirement for 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 seventy five per cent of its total revenue;
(ii) which is operating from a special economic Zone.
(iii) which is engaged in generation of electricity for captive consumption through Captive Generating PIant. For this purpose, the term “Captive Generating Plant” shall have the same meaning as assigned in rule 3 of the Electricity Rules, 2005″;
5. GENERAL STEPS TO BE TAKEN
1) Within 180 days of starting of Financial Year appoint a Cost Auditor
2) Intimate within 30 days of appointment to ROC in CRA-2
3) Preparation of Cost Audit Report in Format CRA-3
4) Submission of the Cost Audit Report to the Board of Directors within 180 days of the closure of financial year
5) Within 30 days of receipt submit it the ROC in form in CRA-4 XBRL Mode.
6. FORMS
| Form | Details | Time Limit |
| CRA-1 | Format of Cost Audit Records | Not Applicable |
| CRA-2 | Appointment of Cost Auditor | 30 days of the Board meeting in which such appointment is made or within a period of 180 days of the commencement of the financial year |
| CRA-3 | Format of Cost Audit Report | Not Applicable |
| CRA-4 | Submission of Cost Audit Report | 30 days of receipt |
Referred Tables
(A) Regulated Sectors
| Sl. No. |
Industry/ Sector/ Product/ Service | 3″Customs 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 and regulated by the Telecom Regulatory Authority of India under the Telecom Regulatory Authority of India Act, 1997 (24 of 1997); including activities that requires authorisation or license issued by the Department of Telecommunications, Government of India under Indian Telegraph Act, 1885 (13 of 1885); | 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); | Generation- 2716; Other Activity- Not Applicable |
| 3. | Petroleum products; including activities 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; Other Activity- Not Applicable |
| 4. | Drugs and pharmaceuticals; | 2901 to 2942; 3001 to 3006. |
| 5. | Fertilisers; | 3102 to 3105. |
| 6. | Sugar and industrial alcohol; | 1701; 1703; 2207. |
(B) Non-regulated Sectors
| Sl. No. | Industry/ Sector/ Product/ Service | *”Customs 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; 8801 to 8805; 8901 to 8908. |
| 2. | Turbo jets and turbo propellers; | 8411 |
| 3. | Arms and ammunitions and Explosives; | 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 per cent, or more by the Government or Government agencies; | 8710 |
| 7. | Port services of stevedoring, pilotage, hauling, mooring, re-mooring, hooking, measuring, loading and unloading 4[services rendered for a Port in relation to a vessel or goods regulated by the Tariff Authority for Major Ports under 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 5[at the 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. | lron and 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 (18 of 2013); | Not applicable. |
| 11. | Rubber and allied products; including products regulated by the Rubber Board constituted under the Rubber Act, 1947 (XXIV of 1947); | 4001 to 4017 |
| 12. | Coffee and tea; | 0901 to 0902 |
| 13. | 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 8608,6[8609] |
| 14. | Cement; | 2523; 6811 to 6812 |
| 15. | Ores and Mineral products; | 2502 to 2522; 2524 to 2526; 2528 to 2530; 2601 to 2617 |
| 16. | Mineral fuels (other than Petroleum), mineral | oils etc.; | 2701 to 2708 |
| 17. | 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. |
| 18. | Inorganic chemicals, organic or inorganic compounds of precious metals, rare-earth metals of radioactive elements or isotopes, and Organic Chemicals; | 2801 to 2853; 2901 to 2942; 3801 to 3807; 3402 to 3403; 3809 to 3824. |
| 19. | Jute and Jute Products; | 5303,6[5307],5310 |
| 20. | Edible Oil; | 1507 to 1518 |
| 21. | Construction Industry as per para No. (5) (a) as specified in Schedule VI of the Companies Act 2013 (18 of 2013); | Not applicable. |
| 22. | Health services, namely functioning as or running hospitals, diagnostic centres, clinical centres or test laboratories; | Not applicable. |
| 23. | 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. |
| 24. | Milk powder; | 0402 |
| 25. | Insecticides; | 3808 |
| 26. | Plastics and polymers; | 3901 to 3914; 3916 to 3921; 3925 |
| 27. | Tyres and tubes; | 4011 to 4013 |
| 28. | 7[Pulp and Paper]; | 6[4701 to 4704],4801 to 4802. |
| 29. | Textiles; | 5004 to 5007; 5106 to 5113; 5205 to 5212; 5303;6[5307] 5310; 5401 to 5408; 5501 to 5516 |
| 30. | Glass; | 7003 to 7008; 7011; 7016 |
| 31. | Other machinery and Mechanical Appliances; | 8402 to 8487 |
| 32. | Electricals or electronic machinery; | 8501 to 8507; 8511 to 8512; 8514 to 8515; 8517; 8525 to 8536; 8538 to 8547. |
| 33. | Production, import and supply or trading of following medical devices, namely:-
i. Cardiac stents; ii. Drug eluting stents; iii. Catheters; iv. Intra ocular lenses; v. Bone cements; vi. Heart valves; vii. Orthopaedic implants; viii. Internal prosthetic replacements; ix. Scalp vein set; x. Deep brain stimulator; xi. Ventricular peripheral shud; xii. Spinal implants; xiii. Automatic impalpable cardiac 8[defibrillators], xiv. Pacemaker (temporary and permanent); xv. Patent ductus arteriosus, atrial septal defect and ventricular septal defect closure device; xvi. Cardiac re-synchronize therapy ; xvii. Urethra spinicture devices; xviii. Sling male or female; xix. Prostate occlusion device; and xx. Urethral stents: Provided that nothing contained in serial number 33 shall apply to foreign companies having only liaison offices. |
9018 to 9022″]. |
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