CMA Krishna N. Chaubey
Analysis of Companies (Cost Records and Audit) Amendment Rules, 2014
Introduction: In exercise of the power, the Central Government issued Companies (Cost Records and Audit) Rules, 2014, on 30th June 2014. Subsequently Government issued Companies (Cost Records and Audit) Amendment Rules, 2014 on 31st December 2014. The amendment rules has introduced certain changes to the original rules . Thus Companies (Cost Records and Audit) Rules, 2014 read with the Amendment Rules 2014.
Applicability of the Companies (Cost Records and Audit) Rules 2014:
1) Maintenance of Cost Records: Every Company, including foreign companies defined in clause (42) of the section 2 of the company act, engaged in the production of goods or providing services, specified in table A & B (Regulated and Non-Regulated Industries) having an overall turnover from all its products and services of Rs. 35 Crore ( Thirty Five Crore) or more during the immediately preceding financial year , shall be required to maintain cost accounting records.
Thus every company under these rules including all units and branches thereof, shall, in respect of each of its financial year commencement on or after the 1st day of April, 2014 , maintain cost records in Form-1. The cost records referred to in sub-rules (1) shall be maintained on regular basis in such manner as facilities to calculation of per unit cost of production or cost of operations, cost of sales and margin for each of its products and activates for every financial year on monthly or quarterly or half-yearly or annual basis.
As per rule 2(e) of the companies (Cost Records and Audit) Rules, 2014 “Cost Records” means book of account relating to utilization of material, labour and others items of cost as applicable to the production of goods or provision of services as provided in section 148 of the act.
2) Applicability of Cost Audit:
a) Every company specified in table A of rules 3 shall get its cost records audited in accordance with these rules if the overall annual turnover of the companies from all its products and services during immediately preceding financial year is Rs. 50 crore (Fifty Crore) or more and the aggregate turnover of the individual product or service or service for which cost records are required to maintained under rule 3 , is Rs. 25 crore (Twenty Five Crore) or more.
b) Every company specified in table B of rules 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 Rs. 100 crore(One hundred 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 in Rs 35 Crore(Rs. Thirty Five Crore) or more.
c) The requirement for cost audit under these rules shall not apply to a company which is covered in rule3, and-
Whose revenue from export, in foreign exchange, exceeds (75%)seventy five percent of its total revenue; or
Which is operating from a special economic zone.
A. Regulated Sectors
| Sl.No | Industry/Sector/Product/Service | CETA Heading (Where applicable) |
| 1. | Telecommunication services made available to users by means of any transmission or reception of sings, signals, writing, images and sounds or intelligence of any nature (other than board casting services) and regulated by the Telecom Regulatory Authority of India under the Telecom Regulatory 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); | Not Applicable |
| 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. | Fertilisers | 3102 to 3105 |
| 6. | Sugar and Industrial Alcohol | 1701;1703;2207 |
B. Non-Regulated
| Sl.No | Industry/Sector/Product/Service | CETA Heading (Where applicable) |
| 1. | Machinery and mechanical appliances used in defence, space and atomic energy sectors excluding and ancillary item or items;Explanation- For the purpose 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 powder; prepared explosive (other than propellant powder); safety fuses; detonating fuses; percussion or detonating caps; igniters; eclectic detonators; | 3601 to 3603 |
| 5. | Radar apparatus, radio navigational aid apparatus and radio remote control apparatus; | 8526 |
| 6. | Tank and other armoured fighting vehicles, motorized, whether or not with weapons and parts of such vehicles, that are funded (investment made in the company) to the extent of ninety percent (90%), or more by the government or government agencies; | 8710 |
| 2. | Turbo jets and turbo propellers; | 8411 |
| 3. | Arms and ammunitions; | 3601 to 3603; 9301 to 9306 |
| 4. | Propellant powder; prepared explosive (other than propellant powder); safety fuses; detonating fuses; percussion or detonating caps; igniters; eclectic detonators; | 3601 to 3603 |
| 5. | Radar apparatus, radio navigational aid apparatus and radio remote control apparatus; | 8526 |
| 6. | Tank and other armoured fighting vehicles, motorized, whether or not with weapons and parts of such vehicles, that are funded (investment made in the company) to the extent of ninety percent (90%), 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 trust 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 airport and regulated by the airport economic regulator authority under the airport 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. | Coffee and Tea; | 0901 to 0902 |
| 13. | Railways or tramway locomotive, rolling stock, railway or tramway fixtures and fittings, mechanical (including electro mechanical ) traffic signalling equipments of all kind; | 8601 to 8608 |
| 14. | Cements; | 2523;6811 to 6812 |
| 15. | Ore 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; | 5303,5310 |
| 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 from part of any business ; | Not applicable |
| 24. | Milk Powder; | 0402 |
| 25. | Insecticides; | 3808 |
| 19. | Jute and Jute Products; | 5303,5310 |
| 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 from part of any business ; | Not applicable |
| 24. | Milk Powder; | 0402 |
| 25. | Insecticides; | 3808 |
| 26. | Plastics and Polymers; | 3901 to 3914; 3916 and 3921;3925 |
| 27. | Types and Tubes; | 4011 to 4013 |
| 28. | Paper; | 4801 to 4802 |
| 29. | Textiles; | 5004 to 5007;5106 to 5113; 5205 to 5212; 5303; 5310;5401 to 5408; 5501 to 5516 |
| 30. | Glass ; | 7003 to 7008, 7011, 7016 |
| 31. | Other Machinery; | 8403 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 followings 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 deflobillator; xiv) Pacemaker (temporary and permanent); xv) Patent dectusarteriosus, atrial septal defect and ventricular septal defective closure device; xvi) Cardiac re-synchronize therapy; xvii) Urethra spinicture devices; xviii) Sling male or female; xix) Prostate occlusion device; and xx) Urethral stents; |
8501 to 8507; 8511 to 8512; 8514 to 8515; 8517;8525 to 8536;8538 to 8547 |
(Author is associated with K.N.Chaubey & Associates, Cost & Management Accountants, 204,2nd Floor,Gajraj Mension, Bistupur,Jamshedpur-831001. Mob:099 3933 9158)
