Companies (Cost Records and Audit) Rules, 2014 – Simplified

Applicability – Rule 1(2) specifies applicability from the date of publication in official gazette i.e. June 30, 2014.

Cost Records – Rule 2(e) lays down cost records as 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.

Application of Cost Records – Rule 3 & Rule 4

Following companies, including foreign companies shall be required to include cost records in their books of accounts.

Sector / Industry	Threshold Limit	Industry Type
Strategic Sector	Net Worth > Rs. 500 croreOR Turnover > Rs. 500 crore	Machinery and mechanical appliances used in defence, space and atomic energy sectors excluding any ancillary item or items; Turbo jets and turbo propellers; Arms and ammunitions; Propellant powders; prepared explosives, (other than propellant powders); safety fuses; detonating fuses; percussion or detonating caps; igniters; electric detonators; Radar apparatus, radio navigational aid apparatus and radio remote control apparatus; 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;
Industry regulated by a Sectoral Regulator or a Ministry or Department of Central Government	Multi-product or a multi services companyAny product or a service for which the Individual turnover> Rs. 50 crore A company, producing any one specific product or service Net Worth of the company > Rs. 150 crore OR Turnover > Rs. 25 crore Companies engaged in an industry regulated by a sectoral regulator The requirements of sectoral regulator regarding cost records shall be taken into account.	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); 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); 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); 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); Steel; Roads and other infrastructure projects; Drugs and Pharmaceuticals; Fertilisers; Sugar and industrial alcohol; Petroleum products regulated by the Petroleum and Natural Gas Regulatory Board under the Petroleum and Natural Gas Regulatory Board Act, 2006(19 of 2006); Rubber and allied products being regulated by the Rubber Board.
Areas involving public interest	Multi-product or a multi services companyAny product or a service for which the Individual turnover> Rs. 50 crore A company, producing any one specific product or service Net Worth of the company > Rs. 150 crore OR Turnover > Rs. 25 crore	Railway or tramway locomotives, rolling stock, railway or tramway fixtures and fittings, mechanical (including electro mechanical) traffic signalling equipment’s of all kind; Mineral products including cement; Ores; Mineral fuels (other than Petroleum), mineral oils etc.; Base metals; Inorganic chemicals, organic or inorganic compounds of precious metals, rare-earth metals of radioactive elements or isotopes, and Organic Chemicals; Jute and Jute Products; Edible Oil under Administrative Price Mechanism; Construction Industry; Companies engaged in health services viz. functioning as or running hospitals, diagnostic centres, clinical centres or test laboratories; 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.
Companies (including foreign companies other than those having only liaison offices) engaged in the production, import and supply or trading of medical devices	Multi-product or a multi services companyAny product or a service for which the Lesser of: Individual turnover >Rs. 10 crore OR 1/3rd of Turnover A company, producing any one specific product or service Net Worth of the company > Rs. 150 crore OR Turnover > Rs. 25 crore	Cardiac Stents;Drug Eluting Stents; Catheters; Intra Ocular Lenses; Bone Cements; Heart Valves; Orthopaedic Implants; Internal Prosthetic Replacements; Scalp Vein Set; Deep Brain Stimulator; Ventricular peripheral Shud; Spinal Implants; Automatic Impalpable Cardiac Deflobillator; Pacemaker (temporary and permanent); Patent ductus arteriosus, atrial septal defect and ventricular septal defect closure device; Cardiac Re-synchronize Therapy ; Urethra Spinicture Devices; Sling male or female; Prostate occlusion device; and Urethral Stents.

 Non-Applicability – Rule 7

♥ Companies covered under Rule 3

AND

♥ Revenue from exports, in foreign exchange, > 75% of its total revenue

OR

♥  Operating from a special economic zone

Maintenance of Records – Rule 5

• To be maintained in respect of each financial year of applicable entity commencing on or after April 1, 2014 in respect of very applicable entity, its units and branches
• Format of Cost Records – Form CRA-1 to be maintained on regular basis
• Should facilitate calculation of per unit cost of production or cost of operations, cost of sales and margin for each of its products and activities
• Should be prepared for every financial year on monthly or quarterly or half-yearly or annual basis

Cost Audit – Rule 6

• Cost auditor to be appointed within 180 days from the commencement of every financial year
• Form CRA-2 of Appointment of Cost Auditor needs to be filed – Earlier of

Thirty days from the Board meeting in which such appointment is made

or

One hundred and eighty days of the commencement of the financial year.

• Tenure of Cost Auditor – Expiry of 180 days from the closure of financial year or submissions of cost audit report in Form CRA-3 for the financial year.
• Cost Auditor shall forward his report in Form CRA-3 to the Board of Directors within a period of 180 days, who shall thereafter, within a period of 30 days from the date of receipt of copy of report, furnish the Central Government with such report along with full information and explanation on every reservation or qualification contained therein, in form CRA-4.

Extension for filing Form CRA-2

General Circular No. 42/2014 has been notified by MCA on November 12, 2014 in relation to matters relating to the Companies (Cost Records and Audit) Rules, 2014.

Due to delay in availability of Form CRA-2 on MCA website, the date of filing of the said form without late penalty/fee has been extended to January 31, 2015. Those companies who have filed Form 23C for the year financial year 2014-15, need not file Form CRA-2 afresh.

Matters expressed in this write-up and the compilations are on the basis of our understanding of the Companies Act, 2013 and the existing rules regulations issued in this regard.. While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. We will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within this write-up or any information accessed herein.