CMA Harshad Deshpande

Ministry of Corporate affairs (MCA) on 3rd December released Companies (Cost Records and Audit) Amendment Rules, 2018. MCA has released draft rules earlier for public comments. However the rules published are very much different than what was being offered for public comments. The changes which are proposed in the amendment are as under :

Sr Rule Pre-Amendment Post Amendment Change Impact
1 Rule 3, Table (B) Non Regulated Sector, Srl No. 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)” Port services of stevedoring, pilotage, hauling, mooring, re-mooring, hooking, measuring, loading and unloading services rendered for a port in relation to a vessel regulated by tariff authority for Major Ports under the Major Port Trusts Act, 1963 (38 of 1963)” for the words ‘by a port’ words “for a port” are substituted It will include Companies who are providing Port services of stevedoring, pilotage, hauling, mooring, re-mooring, hooking, measuring, loading and unloading services rendered to a port.
2 Rule 3, Table (B) Non Regulated Sector, Srl No. 8 Aeronautical services of air traffic management, aircraft 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) Aeronautical services of air traffic management, aircraft Aeronautical services of air traffic management, aircraft operations, ground safety services, ground handling, cargo facilities and supplying fuel rendered at the airports and regulated by the Airports Economic Regulatory Authority under the Airports Economic Regulatory Authority of India Act, 2008 (27 of 2008) for the words ‘by airports’ words “at the airports” is substituted It will include Companies who are providing Aeronautical services of air traffic management, aircraft Aeronautical services of air traffic management, aircraft operations, ground safety services, ground handling, cargo facilities and supplying fuel rendered rendered “at the airport”,
3 Rule 3, Table (B) Non Regulated Sector, Srl No. 13 Railway or tramway locomotives, rolling stock, railway or tramway fixtures and fittings, mechanical (including electro mechanical) traffic signalling equipment’s of all kind CETA HEADING : 8601 TO 8608 Railway or tramway locomotives, rolling stock, railway or tramway fixtures and fittings, mechanical (including electro mechanical) traffic signalling equipment’s of all kind CETA HEADING : 8601 TO 8609 CETA 8609 is added No major change as the companies are being covered under other CTH headings.

CTH 8609- CONTAINERS (INCLUDING CONTAINERS FOR THE u 12.5% TRANSPORT OF FLUIDS) SPECIALLY DESIGNED AND EQUIPPED FOR CARRIAGE BY ONE OR MORE MODES OF TRANSPORT shall be covered for Cost Accounting Records and Audit.

4 Rule 3, Table (B) Non Regulated Sector, Srl No. 19 Jute and Jute Products CETA HEADING : 5303, 5310 Jute and Jute Products CETA HEADING : 5303, 5307, 5310 CETA 5307 is added No major change as the companies are being covered under other CTH headings.

CETA 5307- YARN OF JUTE OR OF OTHER TEXTILE BAST FIBRES OF HEADING 5303 covering the following items: 5307 10 – Single : 5307 10 10 — Of jute Fibre 5307 10 90 — Other Fibres 5307 20 00 – Multiple (folded) or cabled shall be additionally covered for Cost Accounting Records and Audit.

5 Rule 3, Table (B) Non Regulated Sector, Srl No. 28 Paper CETA HEADING : 4801 to 4802 Pulp & Paper CETA HEADING : 4701 to 4704, 4801 to 4802 “Pulp” & CETA 4701 to 4704 are added  The Companies Manufacturing only Pulp will also get covered
6 Rule 3, Table (B) Non Regulated Sector, Srl No. 29 Textiles CETA HEADING: 5004 to 5007; 5106 to 5113; 5205 to 5212; 5303; 5310; 5401 to 5408; 5501 to 5516 Textiles CETA HEADING: 5004 to 5007; 5106 to 5113; 5205 to 5212; 5303; 5307; 5310; 5401 to 5408; 5501 to 5516 CETA 5307 is added No major change as the companies are being covered under other CTH headings.
7 Rule 3, Table (B) Non Regulated Sector, Srl No. 33 point no. (XIII) (xiii) Automatic impalpable cardiac deflobillator (xiii) Automatic impalpable cardiac defibrillator The word Deflobillator is replaced with Defibrillator No impact on coverage, just correction in the technical name of the medical apparatus used to support cardiac ailments.

 Other Amendments

Rule 6 , sub Rule (6)

Provided that the companies which have got the extension of time of holding Annual General Meeting under section 96(1) of the Companies Act, 2013, may file Form CRA-4 within resultant extended period of filing of financial statements under section 137 of the Companies Act, 2013

Impact : It will allow time extension of last date of filing of Cost Audit Reports by companies getting extension of time for holding Annual General meeting.          However the amendment is not extended to form CRA-3 which is Cost Audit Report. Hence there is confusion in revision as it is allowing the time extension for efilling however no time extension for Cost Auditor.

FORM CRA-3, Note , Note (3)

The unit of measurement for each Customs Tariff Act Heading, wherever applicable, shall be the same as provided for in the Customs Tariff Act, 1975 (51 of 1975) corresponding to that particular Customs Tariff Act Heading.

Impact : The idea is to bring uniformity in reporting the unit of measurement in respect of products and thereby helping the authorities to assimilate the information for other regulatory uses including matters concerning pricing, WTO and anti-dumping. However it may also create problem for Cost Auditor as many companies follow different UOM for invoicing. E.g. CTH UOM is for many Chapter heading under chapter 84 is Kgs whereas the product is being sold in Nos or Sets. In such cases it will be mandatory to follow same UOM as per CTH.

Summary :

In short following CETA (CTH) heading are being added 8609, 5307, 4701-4704 and companies providing the Port Services and Aeronautical services to Ports / Airports will get added.

Much more was expected from MCA, especially the amendment in the annexures to Cost Audit Report in the light of advent of GST. It is also important to note that these amendments will be in force from date of publication in official gazette and last 2 amendments in Companies (Cost Records and Audit) Rules s are yet to be gazettised.

(The author can be reached at harshad_de@hotmail.com)

Author Bio

Qualification: CMA
Company: Harshad S Deshpande & Associates
Location: Pune, Maharashtra, IN
Member Since: 14 Feb 2019 | Total Posts: 5
CMA Harshad S. Deshpande is practicing cost & management accountant and partner in M/S Harshad S Deshpande & Associates firm of practicing CMAs rendering professional services in the field of Cost & Management accounting, Finance and Indirect Tax for more than 12 years of experience. View Full Profile

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2 Comments

  1. Himalendu Bose says:

    Much more expected as Service quality from the practising cost accountants.

    Cost audit certificates for companies with turnover of 1oo crores + are issued at Rs 25,000 on a average.

    Is this the price of a quality audit?

    Cost audit report has Cost & margin reporting at HSN level. How does it help the government from a compliance perspective ?

    Of course Cost and Margin reporting holds good for Listed companies, companies with bank borrowings and industry with regulators in place.

    Are the Cost auditors failing the profession?

    Key industry like Automobile, Packaged food etc are left out from the scope of cost records and audit.

    There is no scope of compliance certification with respect to internal audit risk for the class of companies covered above.

    Lot is expected from the professional representatives which doesn’t seems to be working out so far.

    1. Anuradha Dhavalikar says:

      If the companies stop looking at this as merely one more compliance (read as “headache”), and take the cost records and audits seriously, certainly, the Cost Auditors are capable of delivering the ammo. How long are the CFOs and the BoDs going to take to realise the value of this audit, is the real question. GOI has made it mandatory to maintain cost records. It cannot mandate its judicious use by these people. As they say, you can take the horse up to the water, but you cannot make it drink!
      As for the poor audit fees, there are several reasons:
      The companies that are covered under cost records requirements are not necessarily covered under cost audit. The mechanism for compliance certification (that existed under the 2011 Rules) has been removed.
      Further, the number of products and/or services covered has also been cut down drastically. Major industries have been left out, despite the recommendations of the Expert Committee.
      The threshold limits for applicability of Cost Audit is set at much higher levels as compared to the 2011 Rules. This has further reduced the coverage.
      These changes have practically put a large number of Practicing Cost Accountants out of business. They have chosen to take up employment or shift to other areas of practice such as GST.
      The Institute has upgraded the syllabus to sync with the times. This has resulted in the course becoming vast, as compared to the other professional courses. A certain number of years’ training in the prescribed areas before applying for membership is mandatory. The inflow of students to the course has dwindled to abysmal levels. The better student seems to prefer a more lucrative profession with a better chance of passing the exam. Most Cost Auditors have to make do with non-qualified paid employees instead of semi-qualified trainees. This is a strain on their personal time as well as meagre earnings. So, more and more are looking for new pastures.

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