Introduction: Ministry of Corporate Affairs has notified the Companies (Cost records and audit) Rules 2014 under section 148 & 469 Companies Act 2013 on 30th June 2014. These rules have lot of questions among the finance professionals about the limited scope of Cost records maintenance and Audit. Compare to the previous Companies Cost records & Audit rules 2011, most of the sectors are out of coverage under these new rules. I hereby discussing about the highlights & main points in the Companies (Cost records and Audit) Rules 2014.
Definitions: Definitions under these rules have been kept same as previous rule 2011 such as Cost Accountant in Practice, Cost auditor, Cost audit report, Cost records etc. As per the rules Cost audit can be done by the person has specialization and having obtained the qualification under Cost Accountants institute and also having valid certificate of practice.
Cost Auditor appointment: Cost auditor appointment under previous rules companies covered under Cost Audit has to file the form 23C within 90 days from the date of commencement of each financial year. This will be the approval process from the Central Government; if any query or clarification from the Government not received it treated as deemed to be approved. But the new notified rules 2014 has changed this process, now there is no Central Government approval process through form 23C, however the companies covered under Cost audit category has to appoint the Cost auditor in the Board meeting and need to intimate to Central Government within 30 days from the date of such board meeting or 180 days from the commencement of the financial year whichever is earlier through electronic mode in the Form CRA-2
Applicability of Cost records: According this rules the companies are divided in to 4 classes of companies to cover under maintenance of Cost records as the table given below
|
S.No |
Class of Company |
Industries Covered |
Threshold limits |
|
1 |
Class A- Companies engaged in production of goods in Strategic Sectors |
i. Machinery and mechanical appliances used in defence, space and atomic energy sectors excluding any ancillary item or items ii. Turbo jets and turbo propellers iii. Arms and ammunitions iv. Propellant powders; prepared explosives, (other than propellant powders); safety fuses; detonating fuses; percussion or detonating caps; igniters; electric detonators v. Radar apparatus, radio navigational aid apparatus and radio remote control apparatus vi. 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 |
Under this class of companies Cost records rules will apply if the Company Net worth is Rs.500 Crore or More OR Turnover of the company is Rs. 500 Crore or more |
|
2 |
Class B- Industries regulated under a sectoral Regulator or Ministry or Department of Central Government |
i. 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) ii. 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) iii. 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 (other than broadcasting services) and regulated by the Telecom Regulatory Authority of India under the Telecom Regulatory Authority of India Act, 1997 (24 of 1997) iv. 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 (as defined under the Electricity Rules 2005) v. Steel vi. Roads and other infrastructure projects vii. Drugs and Pharmaceuticals viii. Fertilisers ix. Sugar & Industrial alcohol x. Petroleum products regulated by the Petroleum and Natural Gas Regulatory Board under the Petroleum and Natural Gas Regulatory Board Act, 2006(19 of 2006) xi. Rubber and allied products being regulated by the Rubber Board |
Under this class of companies Cost records rules will apply if the company has multiple products & services , any specific products or services for which individual turnover is Rs. 50 Crore or more of such specific products or services If the company has one specific product or service, if the net worth of the company is Rs. 150 Crore or More or Turnover Rs. 25 Crore or more |
|
3 |
Class C- Companies operating in areas of public interest |
i. Railway or tramway locomotives, rolling stock, railway or tramway fixtures and fittings, mechanical (including electro mechanical) traffic signalling equipment’s of all kind ii. Mineral products including cement iii. Ores iv. Mineral fuels (other than Petroleum), mineral oils etc v. Base metals vi. Inorganic chemicals, organic or inorganic compounds of precious metals, rare-earth metals of radioactive elements or isotopes, and Organic Chemicals vii.Jute and Jute Products viii. Edible Oil under Administrative Price Mechanism ix. Construction Industry x. Companies engaged in health services viz. functioning as or running hospitals, diagnostic centres, clinical centres or test laboratories xi. Companies engaged in education services, other than such similar services falling under philanthropy or as part of social spend which do not form part of any business |
Under this class of companies Cost records rules will apply if the company has multiple products & services , any specific products or services for which individual turnover is Rs. 50 Crore or more of such specific products or services If the company has one specific product or service, if the net worth of the company is Rs. 150 Crore or More or Turnover Rs. 25 Crore or more |
|
4 |
Class D - Companies (including foreign companies other than those having only liaison offices) engaged in the production, import and supply or trading of medical devices |
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 Page 7 of 54 xiii. Automatic Impalpable Cardiac 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 |
Under this class of companies Cost records rules will apply if the company has multiple products & devices for which individual turnover (from such specific product or device) is Rs. 10 Crore or more or 1/3 of the turnover whichever is less In the case of a company engaged in one specific product or device, if it has net worth of Rs.150 Crore or more or the turnover is Rs.25 Crore or more |
Applicability of Cost Audit: The following categories of companies covered under cost audit based on the threshold limits as below:
|
S.No |
Class of Companies |
Threshold limit |
|
1. |
Class A- Companies engaged in production of goods in Strategic Sectors |
Under this class of companies Cost audit rules & audit will apply if the Company Net worth is Rs.500 Crore or More OR Turnover of the company is Rs. 500 Crore or more |
|
2 |
Class B- Industries regulated under a sectoral Regulator or Ministry or Department of Central Government |
1.In the case of a multi-product or a multi services company, Cost audit will apply if the individual turnover of such specific product or services is Rs. 100 Crore or more 2. In the case of a company producing any one specific product or service specified, Cost audit will apply if the net worth of the company is Rs.500 Crore or more or Turnover of such product or service Rs.100 Crore or more |
|
3 |
Class C- Companies operating in areas of public interest |
1.In the case of a multi-product or a multi services company, Cost audit will apply if the individual turnover of such specific product or services is Rs. 100 Crore or more 2. In the case of a company producing any one specific product or service specified, Cost audit will apply if the net worth of the company is Rs.500 Crore or more or Turnover of such product or service Rs.100 Crore or more |
|
4 |
Class D - Companies (including foreign companies other than those having only liaison offices) engaged in the production, import and supply or trading of medical devices |
1.In the case of a multiple product or devices company, Cost audit will apply if the individual turnover of such specific product or device is Rs. 10 Crore or more or 1/3rd of the turnover whichever is less 2.In the case of a single product or devices company, Cost audit will apply if the net worth of the company is Rs. 150 Crore or more or turnover is Rs.25 Crore or more |
Forms and dates: The forms and due dates specified under this rules are below:
|
S.No |
Form name/ E form name |
Purpose |
Filing Due date with ROC |
|
1. |
CRA – 1 |
Form in which Cost records shall be maintained by the company |
Filling is not applicable, only maintaining the records periodically |
|
2 |
CRA-2 |
Intimation form to Central Government regarding appointment of Cost auditor ( E form) by the company |
Within 30 days of Board meeting in which the appointment is made or 180 days of commencement of financial year |
|
3 |
CRA-3 |
Cost audit report format which need to prepared by the cost auditor |
Within 180days from the closure of financial year ( To the Board of directors) |
|
4 |
CRA-4 |
Form for giving explanations & reservations in the cost audit report by the company (E form) |
Within 30 days from the receipt of Cost audit report ( need to file along with Cost audit report) |
Exclusions: This Companies (Cost records & Audit) Rules 2014 not applicable for the following categories of companies even they covered under applicable class of companies as mentioned above
a. whose revenue from exports, in foreign exchange, exceeds seventy five per cent of its total revenue or
b. Which is operating from a special economic zone
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