Section 148 of Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014
Application of Cost Records
- The companies, including foreign company engaged in the production of the goods or providing services as specified and having overall turnover from all its goods and services of Rs. 35 Crores or more during immediately preceding financial year, shall include cost records for such products or services in their books of accounts.
- The specified company has been divided into 2 groups namely:
(a) Regulated sectors
(b) Non-Regulated sectors
REGULATED SECTORS
- - Telecommunication services
- - Generation, transmission, distribution and supply of electricity
- - Petroleum products
- - Drugs and Pharmaceuticals
- - Fertilisers
- - Sugar and industrial alcohol.
NON-REGULATED SECTORS
- - Machinery and mechanical appliances used in defence, space and atomic energy.
- - Turbo jets and turbo propellers
- - Arms and ammunitions
- - Propellant powders, safety fuses, detonating fuses, percussion or detonating caps, igniters and electric detonators
- - Radar apparatus, radio navigational aid apparatus and radio remote control apparatus
- - Tanks and other armoured fighting vehicles
- - Port services
- - Aeronautical services
- - Steel
- - Roads and other infrastructure projects as per Sch. VI of Companies Act, 2013
- - Rubber and allied products
- - Coffee and tea
- - Railway or related instruments/ services
- - Cement
- - Ores and minerals products
- - Mineral fuels, mineral oils, etc
- - Base metals
- - Inorganic Chemicals, organic or inorganic compounds
- - Jute and jute products
- - Edible oil
- - Construction Industry as per para no. (5)(a) of Sch. VI of the Companies Act, 2013
- - Health services
- - Education services
- - Milk powder
- - Insecticides
- - Plastics and polymers
- - Tyres and tubes
- - Paper
- - Textiles
- - Glass
- - Other machinery
- - Electricals or electronic machinery
- - Production, import and supply or trading of specified medical services.[This shall not apply to foreign companies having only liaison offices]
- The provision of cost audit is not applicable to a company 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.
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Applicability of Cost Audit
- Every company falls under regulated sectors shall have to get its cost records audited if from its products and services :
Overall turnover ≥ Rs. 50 cr.
AND
Aggregate turnover of ≥ Rs. 25 Cr.
individual products/ services
- Every company falls under non-regulated sectors shall have to get its cost records audited if from its products and services :
Overall turnover ≥ Rs. 100 cr.
AND
Aggregate turnover of ≥ Rs. 35 Cr.
individual products/ services
- The company which are required to maintain cost records shall not required to get its records audited, if
(a) revenue of the company from exports, in foreign exchange, exceeds 75% of its total revenue; or
(b) the company is operating from SEZ.
Maintenance of Records
- Cost records shall be maintained on regular basis in such a 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.
- The cost records shall be maintained in such manner so that it helps in optimum utilization of resources.
Cost Audit
- The company shall appoint Cost Auditor within 180 days of the commencement of the financial year.
- Company shall inform the Cost Auditor of his appointment and file a notice of such appointment to the Central Government within 30 days of the Board meeting in which appointment is made or 180 days of the commencement of the financial year, w.e. earlier through e-form CRA- 2.
- Every Cost Auditor shall continue in such capacity till the expiry of 180 days from the closure of the financial year or till he submits the Cost Audit Report for the financial year for which he has been appointed.
- Any casual vacancy (resignation/ death/ removal) in the office of a Cost Auditor shall be filled by the Board of Directors within 30 days and the company shall inform the Central Government in e-Form CRA-2 within 30 days of such appointment of cost auditor.
- Cost Auditor shall forward his report along with reservation or qualification or observation or suggestion, if any in Form CRA-3 to the Board of Directors of the company within 180 days from the closure of the financial year.
- The Board shall examine and consider the report and file a copy to the Central Government within 30 days of the receipt of the report through e-form CRA-4 along with the full information and explanation on every reservation or qualification contained in the report.
Note:
- The cost audit shall be conducted by a Cost Accountant in practice.
- Cost Auditor is appointed by the Board of Directors.
- Cost Auditor and statutory shall not be same.
- Cost Auditor shall comply with the Cost Accounting Standards.
- Fine & penalty is same as provided in Section 147 read with the Rule 9 of the Companies (Audit and Accounts) Rules, 2014.