valid as on 05/12/2019

Section 148. Central Government to specify audit of items of cost in respect of certain companies
Effective from 01-04-2014

(1) Notwithstanding anything contained in this Chapter, the Central Government may, by order, in respect of such class of companies engaged in the production of such goods or providing such services , direct that particulars relating to the utilisation of material or labour or to such other items of cost as may be prescribed shall also be included in the  kept by such class of companies :

Provided that the Central Government shall, before issuing such order in respect of any class of companies regulated under a special Act, consult the regulatory body constituted or established under such special Act.

(2) If the Central Government is of the opinion, in relation to any company covered by an order under sub-section (1), that it is necessary to do so, it may, by order, direct that the audit of cost records of such company shall be conducted in the manner specified therein.

(3) Where a company includes the particulars relating to items of cost in the books of account in pursuance of a resolution passed by the company, the audit of cost records as contained in the books of account of the company shall be conducted by a cost accountant in practice  who shall be appointed by the on such  as may be determined by the  in such manner as

Provided that no person appointed under section 139 as an auditor of the company shall be appointed for conducting the audit of cost records.

Provided further that the auditor conducting the cost audit shall comply with the cost auditing standards.

Explanation.—For the purposes of this sub-section, the expression “cost auditing standards” mean such standards as are issued by the Institute of Cost and Works Accountants of India , constituted under the Cost and Works Accountants Act, 1959, with the approval of the Central Government.

(4) An audit conducted under this section shall be in addition to the audit conducted under section 143.

(5) The qualifications, disqualifications, rights, duties and obligations applicable to auditors under this Chapter shall, so far as may be applicable, apply to a cost auditor appointed under this section and it shall be the duty of the company to give all assistance and facilities to the cost auditor appointed under this section for auditing the cost records of the company :

Provided that the report on the audit of cost records shall be submitted by the Cost Accountant in practice  to the Board of Directors of the company.

(6) A company shall within thirty days from the date of receipt of a copy of the cost audit report prepared in pursuance of a direction under sub-section (2) furnish the Central Government with such report along with full information and explanation on every reservation or qualification contained therein.

(7) If, after considering the cost audit report referred to under this section and the information and explanation furnished by the company under sub-section (6), the Central Government is of the opinion that any further information or explanation is necessary, it may call for such further information and explanation and the company shall furnish the same within such time as may be specified by that Government.

(8) If any default is made in complying with the provisions of this section,—

(a) the company and every officer of the company who is in default shall be punishable in the manner as provided in sub-section (1) of section 147;

(b) the cost auditor of the company who is in default shall be punishable in the manner as provided in sub-sections (2) to (4) of section 147.

Refer  Companies (Audit & Auditors) Rules, 2014. To view the rule,Click Here
2(13) Books of Account includes records maintained in respect of—

(i) all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place;

(ii) all sales and purchases of goods and services by the company;

(iii) the assets and liabilities of the company; and

(iv) the items of cost as may be prescribed under section 148 in the case of a company

which belongs to any class of companies specified under that section

2(28) Cost Accountant, means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act;
2(10) Board, in relation to a company, means the collective body of the directors of the company
2(78) Remuneration means any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under the Income-tax Act, 1961 (43 of 1961)
2(55) Member in relation to a company, means—

 

(i) the subscriber to the memorandum of the company who shall be deemed to have agreed to become member of the company, and on its registration, shall be entered as member in its register of members;

(ii) every other person who agrees in writing to become a member of the company and whose name is entered in the register of members of the company;

(iii) every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository

Refer  Companies (Audit & Auditors) Rules,2014. To view the rule,Click Here
Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018 effective from 09.02.2018. To view the notification,Click Here
2(28) Cost Accountant, means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act;

10.1.14-Companies (Audit and Auditors) Rules,2014

14. Remuneration of the Cost Auditor.-

For the purpose of sub-section (3) of section 148,

(a) in the case of companies which are required to constitute an audit committee

(i) the Board shall appoint an individual, who is a cost accountant in practice , or a firm of cost accountants in practice, as cost auditor on the recommendations of the Audit committee, which shall also recommend remuneration for such cost auditor;
(ii) the remuneration recommended by the Audit Committee under (i) shall be considered and approved by the Board of Directors and ratified subsequently by the shareholders;

(b) in the case of other companies which are not required to constitute an audit committee, the Board shall appoint an individual who is a cost accountant in practice or a firm of in practice as cost auditor and the remuneration of such cost auditor shall be ratified by shareholders subsequently.

Substituted Companies (Audit and Auditors) Amendment Rules, 2018 dated 07.05.2018 . To view the notification,Click Here
Substituted Companies (Audit and Auditors) Amendment Rules, 2018 dated 07.05.2018 . To view the notification,Click Here
2(28) Cost Accountant, means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act;

10.2.2-Companies (Cost Records and Audit) Rules, 2014

2. Definitions: In these rules, unless the context otherwise requires –

(a) “Act” means the Companies Act, 2013 (18 of 2013);

“Customs Tariff Act Heading” means the heading as referred to in the Additional Notes in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975)

“Central Excise Tariff Act Heading” means the heading as referred to in the Additional Notes in the First Schedule to the Central Excise Tariff Act,1985 [5 of 1986]

(b) “Cost Accountant in practice” means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959), who holds a valid certificate of practice under sub-section (1) of section 6 of that Act and who is deemed to be in practice under sub-section (2) of section 2 thereof, and includes a firm or limited liability partnership of cost accountants;

(c) “cost auditor” means a Cost Accountant in practice, as defined in clause (b), who is appointed by the Board;

“cost audit report” means the duly signed cost auditor’s report on the cost records examined and cost statements which are prepared as per these rules, including attachment, annexure, qualifications or observations attached with or included in such report;”

(e) “cost records” means 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;

(f) “form” means a form annexed to these rules;

(g) “institute” means the Institute of Cost Accountants of India constituted under the Cost and Works Accountants Act, 1959 (23 of 1959);

(h) all other used in these rules but not defined, and defined in the Act or in the Companies (Specification of Definition Details) Rules, 2014 shall have the same meanings as assigned to them in the Act or in the said rules.

Substituted vide Companies (Cost Records and Audit) Second Amendment Rules, 2017 dated 20.12.2017 (effective from 01.07.2017). To view the notification,Click Here
Inserted vide Companies (Cost Records and Audit) Amendment Rules,2014. To view the notification,Click Here
Inserted vide Companies (cost records and audit) Amendment Rules, 2016. To view the notification,Click Here
Inserted  vide Companies (cost records and audit) Amendment Rules, 2017 notification dated 07.12.2017. To view the notification,Click Here
 words and expressions used and not defined in this Act but defined in the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) shall have the meanings respectively assigned to them in those Acts

10.2.3-Companies (Cost Records and Audit) Rules, 2014

For the purposes of sub-section (1) of section 148 of the Act, the class of companies, including foreign companies defined in clause (42) of section 2 of the Act, engaged in the production of the goods or providing services, specified in the Table below, having an overall turnover from all its products and services of rupees thirty five crore or more during the immediately preceding financial year, shall include cost records for such products or services in their books of account, namely:-

SL. No.Industry/ Sector/ Product/ ServiceCustoms Tariff Act Heading Central Excise Tariff Act Heading (substituted vide Companies (cost records and audit) Second Amendment Rules, 2017 effective from 01.07.2017)
(wherever applicable)
1Telecommunication services made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature and regulated by the Telecom Regulatory Authority of India under the Telecom Regulatory Authority of India Act, 7997 (24 of 1997); including activities that requires authorization or license issued by the Department of Telecommunications, Government of India under Indian Telegraph Act, 1885 (13 of 1885);Not applicable
2Generation, transmission, distribution and supply of electricity
regulated by the relevant regulatory body or authority under the
Electricity Act, 2003 (36 of 2003);
Generation-27t6; Other Activity-Not Applicable
3Petroleum products; including activities regulated by the
Petroleum and Natural Gas Regulatory Board under the
Petroleum and Natural Gas Regulatory Board Act,2006 (19 of
2006);
2709 to 27L5; Other Activity-Not Applicable
4Drugs and pharmaceuticals;2901 to 2942; 3001to 3006.
5Fertilizers;3102 to 3105
6Sugar and industrial alcohol;1701; 1703; 2207.

SL. No.Industry/ sector/ Product/ ServiceCustoms Tariff Act Heading Central Excise Tariff Act Heading (substituted vide Companies (cost records and audit) Second Amendment Rules, 2017 effective from 01.07.2017)
(wherever applicable)
1Machinery and mechanical appliances used in defense, space and atomic energy sectors excluding any ancillary item or items;
Explanation. - For the purposes 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; 8801 to 8805;8901 to 8908.
2Turbo jets and turbo propellers;8411
3Arms, ammunitions and Explosives3601 to 3603; 9301 to 9306
4Propellant powders; prepared explosives (other than
propellant powders); safety fuses; detonating fuses;
percussion or detonating caps; igniters; electric
detonators;
3601 to 3603
5Radar apparatus, radio navigational aid apparatus
and radio remote control apparatus;
8526
6Tanks 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;8710
7Port 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 services rendered for a Port in relation to a vessel or goods regulated by the Tariff Authority for Major Ports under the Major Port trusts Act, 1963 (38 of 1963); (substituted vide Companies (Cost Records and Audit) Amendment Rules, 2018 dated 03.12.2018)Not applicable
8Aeronautical 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 at the Airports ; (substituted vide Companies (Cost Records and Audit) Amendment Rules, 2018 dated 03.12.2018) Economic Regulatory Authority under the Airports Economic Regulatory Authority of India Act,2008 (27 of 2008);Not applicable
9lron and Steel;7201 to 7229; 73O7 to 7326
10Roads and other infrastructure projects corresponding to para No. (1) (a) as specified in Schedule Vl of the Companies Act, 2013 (18 of 2013);Not applicable.
11Rubber and allied products; including products
regulated by the Rubber Board constituted under the
Rubber Act, 1.947 (XX|V of 1947);
4001 to 4017
12Coffee and tea;0901 to 0902
13Railway or tramway locomotives, rolling stock,
railway or tramway fixtures and fittings, mechanical
(including electro mechanical) traffic signalling
equipment's of all kind;
8601 to 8608, 8609 (inserted vide Companies (Cost Records and Audit) Amendment Rules, 2018 dated 03.12.2018)
14Cement;2523; 6811 to 5812
15Ores and Mineral products;2502 to 2522; 2524 to 2526;
2528 to 2530; 2601. to 2617
16Mineral fuels (other than petroleum), mineral oils etc;2707 to 2708
17Base metals;7401 to 7403 ;7405 to 7473;
7419;7507 to 7508; 7601 to
7674; 7801 to 7802; 1804;
7806; 7901, to 7905; 7907;
8001; 8003; 8007; 8101 to
8113
18Inorganic 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.
19Jute and Jute Products;5303, 5307 (inserted vide Companies (Cost Records and Audit) Amendment Rules, 2018 dated 03.12.2018), 5310
20Edible Oil;1507 to 1518
21Construction Industry as per para No. (5) (a) as
specified in Schedule Vt of the Companies Act, 2013
(18 of 2013);
Not applicable.
22Health services, namely functioning as or running
hospitals, diagnostic centres, clinical centres or test
laboratories;
Not applicable.
23Education services, other than such similar services
falling under philanthropy or as part of social spend
which do not form part of any business;
Not applicable.
24Milk powder;0402
25Insecticides;3808
26Plastics and polymers;3901 to 3914; 3916 to 3921;
3925
27Tyres and tubes;4011 to 4013
28Paper; Pulp and Paper (substituted vide Companies (Cost Records and Audit) Amendment Rules, 2018 dated 03.12.2018)4701 to 4704 (inserted vide Companies (Cost Records and Audit) Amendment Rules, 2018 dated 03.12.2018), 4801 to 4802
29Textiles;5004 to 5007; 5106 to 5113;
52OS to 521,2; 5303;5307 (inserted vide Companies (Cost Records and Audit) Amendment Rules, 2018 dated 03.12.2018) 5310;
5401 to 5408;5501 to 5516
30Glass;7003 to 7008j 7017;7076
31Other machinery and Mechanical Appliances;8402 to 8487
32Electricals or electronic machinery;8501 to 8507:8511 to 8512:
8514 to 8515; 8517; 8525 to
8536: 8538 to 8547.
33Production, import and supply or trading of following
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 defibrillators (substituted vide Companies (Cost Records and Audit) Amendment Rules, 2018 dated 03.12.2018) ;
(xiv) Pacemaker (temporary and permanent);
(xv) Patent ductus arteriosus, atrial septal defect and
ventricular septal defect closure device;
(xvi) Cardiac re-synchronise therapy ;
(xvii) Urethra spinicture devices;
(xviii) Sling male or female;
(xix) Prostate occlusion device; and
(xx) Urethral stents:
9018 to 9022

Provide that nothing contained in serial number 33 shall apply to foreign companies having only liaison offices

Provided further that nothing contained in this rule shall apply to a company which is 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 (27 of 2006)

Substituted vide Companies (Cost Records and Audit) Amendment Rules,2014. To view the notification,Click Here
Substituted vide Companies (cost records and audit) Amendment Rules, 2016 and Companies (cost records and audit) Second Amendment Rules, 2017 dated 20.12.2017(effective from 01.07.2017). To view the notification,Click Here
Substituted vide Companies (cost records and audit) Amendment Rules, 2016 and Companies (cost records and audit) Second Amendment Rules, 2017 dated 20.12.2017(effective from 01.07.2017). To view the notification,Click Here

10.2.4-Companies (Cost Records and Audit) Rules, 2014

  (1) Every company specified in the item (A) of rule 3 shall be required to 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 rupees fifty crore or more and the aggregate turnover of the individual product or products or service or services for which cost records are required to be maintained under rule 3 is rupees twenty five crore or more

(2) Every company specified in item (B) of rule 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 rupees one hundred crore or more and the aggregate turnover of the individual product or products or service or services for which cost records are required to be maintained under rule 3 is rupees thirty five crore or more.

(3) The requirement for cost audit under these rules shall not apply to a company which is covered in rule 3, and-

(i) Whose revenue from exports, in foreign exchange, exceeds seventy five percent of its total revenue; or

(ii) which is operating from a special economic zone.

which is engaged in generation of electricity for captive consumption through Captive Generating PIant. For this purpose, the term “Captive Generating Plant” shall have the same meaning as assigned in rule 3 of the Electricity Rules, 2005″;

  substituted vide Companies (Cost Records and Audit) Amendment Rules,2014. To view the notification,Click Here
Inserted vide Companies (cost records and audit) Amendment Rules, 2016. To view the notification,Click Here

10.2.5-Companies (Cost Records and Audit) Rules, 2014

5. Maintenance of records.- (1) Every company under these rules including all units and branches thereof, shall, in respect of each of its financial year commencing on or after the 1st day of April, 2014, maintain cost records in

 that in case of company covered in serial number 12 and serial numbers 24 to 32 of item (B) of rule 3, the requirement under this rule shall apply in respect of each of its financial year commencing on or after 1st Day of April,2015

(2) The cost records referred to in sub-rule (1) shall be maintained on regular basis in such 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.

(3) The cost records shall be maintained in such manner so as to enable the company to exercise, as far as possible, control over the various operations and costs to achieve optimum economies in utilisation of resources and these records shall also provide necessary data which is required to be furnished under these rules.

Form CRA 1 deemed to have been substituted with effect from the 1st day of April, 2016 vide Companies (cost records and audit) Amendment Rules, 2017 dated 07.12.2017. To view the return,Click Here
 inserted vide Companies (Cost Records and Audit) Amendment Rules,2014. To view the notification,Click Here

10.2.6-Companies (Cost Records and Audit) Rules, 2014

6. Cost audit.– (1) The category of companies specified in rule 3 and the thresholds limits laid down in rule 4, shall within one hundred and eighty days of the commencement of every financial year, appoint a cost auditor.

 that before such appointment is made, the written consent of the cost auditor to such appointment, and a certificate from him or it,  as provided in sub-rule (1.A), shall be obtained.

The cost auditor appointed under sub-rule (1) shall submit a certificate that-

(a) the individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act, the Cost and Works Accountants Act, 1959 (23 of 1959) and the rules or regulations made thereunder;

(b) the individual or the firm, as the case may be, satisfies the criteria provided in section 141 of the Act, so far as may be applicable;

(c) the proposed appointment is within the limits laid down by or under the authority of the Act; and

(d) the list of proceedings against the cost auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.

(2) Every company referred to in sub-rule (1) shall inform the cost auditor concerned of his or its appointment as such and file a notice of such appointment with the Central Government within a period of thirty days of the Board meeting in which such appointment is made or within a period of one hundred and eighty days of the commencement of the financial year, whichever is earlier, through electronic mode, in , along with the fee as specified in Companies (Registration Offices and Fees) Rules, 2014.

(3) Every cost auditor appointed as such shall continue in such capacity till the expiry of one hundred and eighty 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.

that the cost auditor appointed under these rules may be removed from his office before the expiry of his term, through a board resolution after giving a reasonable opportunity of being heard to the Cost Auditor and recording the reasons for such removal in writing;

that the to be filed with the Central Government for intimating appointment of another cost auditor shall enclose the relevant Board Resolution to the effect:

Provided also that nothing contained in this sub-rule shall prejudice the right of the cost auditor to resign from such office of the company

 Any casual vacancy in the office of a cost auditor, whether due to resignation, death or removal, shall be filled by the Board of Directors within thirty days of occurrence of such vacancy and the company shall inform the Central Government in  within thirty days of such appointment of cost auditor

 The cost statements, including other statements to be annexed to the cost audit report, shall be approved by the Board of Directors before they are signed on behalf of the Board by any of the director authorised by the Board, for submission to the cost auditor to report thereon

(4) Every cost auditor, who conducts an audit of the cost records of a company, shall submit the cost audit report along with his or its reservations or qualifications or observations or suggestions, if any, in .

Every cost auditor shall forward his duly signed report to the Board of Directors of the company within a period of one hundred and eighty days from the closure of the financial year to which the report relates and the Board of Directors shall consider and examine such report, particularly any reservation or qualification contained therein.”;

(5) Every cost auditor shall forward his report to the Board of Directors of the company within a period of one hundred and eighty days from the closure of the financial year to which the report relates and the Board of Directors shall consider and examine such report particularly any reservation or qualification contained therein.

Every company covered under these rules shall, within a period of from the date of receipt of a copy of the cost audit report, furnish the Central Government with such report along with full information and explanation on every reservation or qualification contained therein, in  in Extensible Business Reporting Language format in the manner as specified in the Companies (Filing of Documents and Forms in Extensible Business Reporting language) Rules, 2015 along with fees specified in the Companies (Registration Offices and Fees) Rules, 2014.”

the Companies which have got 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 financial statements under section 137 of the Companies Act, 2013.

(6) Every company covered under these rules shall, within a period of thirty days from the date of receipt of a copy of the cost audit 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 along with fees specified in the Companies (Registration Offices and Fees) Rules, 2014.

(7) The provisions of sub-section (12) of section 143 of the Act and the relevant rules made thereunder shall apply mutatis mutandis to a cost auditor during performance of his functions under section 148 of the Act and these rules.

Inserted vide Companies (cost records and audit) Amendment Rules, 2016. To view the notification,Click Here
Inserted vide Companies (cost records and audit) Amendment Rules, 2016. To view the notificationClick Here
 MCA has relaxed the additional fees and extended last date to file e-Form CRA-2 up to 31.05.2019 vide its circular dated 04.04.2019. To view the Circular, Click Here.

To view the return,Click Here

Inserted vide Companies (cost records and audit) Amendment Rules, 2016. To view the notification,Click Here
Inserted vide Companies (cost records and audit) Amendment Rules, 2016. To view the notification,Click Here
To view the return,Click Here
Inserted vide Companies (cost records and audit) Amendment Rules, 2016. To view the notification,Click Here
 inserted vide Companies (Cost Records and Audit) Amendment Rules,2014. To view the notification,Click Here
To view the return,Click Here
inserted vide Companies (Cost Records and Audit) Amendment Rules,2016. To view the notification,Click Here
Form CRA 3 deemed to have been substituted with effect from the 1st day of April, 2016 vide Companies (cost records and audit) Amendment Rules, 2017. To view the return,Click Here
Substituted vide Companies (Cost Records and Audit) Amendment Rules,2016. To view the notification,Click Here
Substituted vide Companies (Cost Records and Audit) Amendment Rules,2016. To view the notification,Click Here

MCA has extended the last date to file Form CRA-4 for FY 2018-19 to 31.12.2019 vide its Circular dated 24.10.2019. To view the Circular. Click Here.

MCA has extended the time limit for filing form CRA – 4(Cost Audit Report in XBRL format)for the Financial year ended 31.03.2018 with the Registrar of Companies without paying additional fees up to 31.12.2018 vide its circular dated 10.12.2018. To view the Circular,Click Here .

The last date of filing form CRA-4 without additional fee is extended till 31.12.2017 for the financial years starting on or after 1st April, 2016 vide General Circular No. 15/2017 dated 04.12.2017. To view the Circular, Click Here

To view the return,Click Here
Inserted vide Companies (Cost Records and Audit) Amendment Rules, 2018 dated 03.12.2018. To view the notification,Click Here

10.2.7-Companies (Cost Records and Audit) Rules,2014

Rules not to apply in certain cases.– The requirement for cost audit under these rules shall not be applicable to a company which is covered under rule 3, and,

(i) whose revenue from exports, in foreign exchange, exceeds seventy five per cent of its total revenue or
(ii) which is operating from a special economic zone.

Omitted vide Companies (Cost Records and Audit) Amendment Rules,2014. To view the notification,Click Here

9.2.4- Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015

4. Filing of cost audit report:-

 A company required to furnish cost audit report and other documents to the Central Government under sub-section (6) of section 148 of the Act and rules made there under, shall file such report and other documents using the XBRL taxonomy given in   for the financial years commencing on or after 1st April, 2014 in specified under the Companies (Cost Records and Audit) Rules, 2014.

 

 

Substituted vide the Companies (Filing of Documents and Forms in Extensible Business Reporting Language), Amendment Rules, 2019 dated 15.10.2019. To view the Notification. Click Here.
Substituted vide the Companies (Filing of Documents and Forms in Extensible Business Reporting Language), Second Amendment, Rules, 2017 dated 04.12.2017. To view the annexure Click Here
To view the annexure Click Here

MCA has extended the last date to file Form CRA-4 for FY 2018-19 to 31.12.2019 vide its Circular dated 24.10.2019. To view the Circular. Click Here.

To view the return,Click Here


Commencement Notification dated 09.02.2018


Companies (Audit and Auditors) Amendment Rules, 2018 [GSR 432 (E)] dated 07/05/2018


Companies (cost records and audit) Amendment Rules, 2014 dated 31/12/2014


Companies (cost records and audit) Amendment Rules, 2016 [GSR 695(E)] dated 14/07/2016


Companies (cost records and audit) Amendment Rules, 2017 dated 07/12/2017


Companies (cost records and audit) Second Amendment Rules, 2017 [GSR 1526(E)] dated 20/12/2017


Companies (Filing of Documents and Forms in Extensible Business Reporting language) Rules, 2015 dated 9/03/2015

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3,
SUB SECTION (i)]
Ministry of Corporate Affairs
Notification
New Delhi, the 9th September,2015
G.S.R._(E). – In exercise of the powers conferred by sub-sections (1) and (2) of section 469 read with section 398 of the Companies Act, 2013 (18 of 2013), and in supersession of the Companies (Filing of Documents and Forms in ExtensibleBusiness Reporting Language) Rules, 2011, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:
1. Short title and commencement-
(1) These rules may be called the Companies (Filing of Documents and Forms in ExtensibleBusiness Reporting language) Rules, 2015.
(2) They shall come into force from the date of their publication in the Official Gazette.
2 Definitions: –
(1) In these rules, unless the context otherwise requires,-
(a) “Act’ means the Companies Act, 2013;
(b) “Annexure” means annexures appended to these rules;
(c) “Documents and forms” means the documents and forms required to be filed with any authority as specified under the Act or rules or regulations made there under;
(d) “Extensible Business Reporting Language” (XBRL), means a standardised language for communication in electronic form to express, report or file financial  information by the companies under the Act
(e) “Taxonomy” means in XBRL, an electronic dictionary for reporting the business data as approved by the Central Govemment in respect of any  documents or forms indicated in these rules.
(2) Words and expressions used in these rules but not defined and defined in the act Companies (Specification of definitions details) Rules,2014 shall have the meanings respectively assigned to them in the Act and said rules.
3. Filing of financial statement with Registrar:- The following class of companies shall file their financial statement and other documents under section 137 of the Act with the Registrar in e-form AOC-4 XBRL given in Annexure-1 for the financial years commencing on or after 1stApril, 2014 using the XBRL taxonomy  given in Annexure II, namely:
(i) all companies listed with any Stock Exchange(s) in India and their lndian  subsidiaries; or
(ii) all companies having paid up capital of rupees five crore or above;
(iii) all companies having turnover of rupees hundred crore or above; or
(iv) all companies which were hitherto covered under the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2011
4. Filing of cost audit report – A company required to furnish cost audit report and other documents to the Central Government under sub-section (6) of section 148 of the Act and rules made thereunder, shall file such report and other documents using the XBRL taxonomy given in Annexure III for the financial years commencing on or after 1st April,2014 in e-Form CRA-4 specified under the Companies (Cost Records and Audit) Rules,2014.

Substituted vide  Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Amendment Rules, 2016. To view the notification,Click Here

The Companies (Amendment) Act, 2017 (Effective from 03.01.2018)


The Companies (Filing of Documents and Forms in Extensible Business Reporting Language), Second Amendment, Rules, 2017 dated 04/12/2017


Circular on Relaxation of additonal fees and extension of last date of filing of CRA 4(Cost Audit Report in XBRL Format) dated 10.12.2018


Circular relaxing additional fees and extension of last date of filing e-Form CRA-2 dated 04.04.2019


Circular relaxing additional fees and extension of last date to file Form CRA-4 for the FY 2018-19 dated 24.10.2019


Corrigendum to Notification No. G.S.R. 432(E) dated 17.05.2018


General Circular 12/2015


General Circular 15/2017


CRA- 2 (Form of intimation of appointment of cost auditor by the company to Central Government.)


CRA-1(PARTICULARS RELATING TO THE ITEMS OF COSTS TO BE INCLUDED IN THE BOOKS OF ACCOUNTS:) [Effective till 31 Mar 2016]

Form CRA-1
[Pursuant to Rule 5(1) of the companies (Cost Rrecords and Audit) Rules, 2014]
Form in which Cost Records shall be maintained
PARTICULARS RELATING TO THE ITEMS OF COSTS TO BE INCLUDED IN THE
BOOKS OF ACCOUNTS:

1. INPUT MATERIAL(S)/SERVICE(S):

(1) Proper records shall be maintained showing separately all receipts, issues and balances both in quantities and cost of each item of raw material/input services (including all direct charges upto the works) required for the production of goods or rendering of services under reference. The basis, on which quantities, cost of issue and consumption are calculated, shall be indicated in the cost records and followed consistently. In the case of imported raw materials/input services, proper records shall be maintained showing quantity of imported material/service, Free On Board value, overseas freight, insurance, customs duty and inland freight charges along with license-wise quantities allowed, actual quantities imported, actual quantities consumed, quantities in stock and quantities yet to be imported out of total licensed quantities. If both indigenous and imported materials/services are consumed, the records showing details of percentage mix of the same have to be maintained for each item.

(2) Proper records shall be maintained separately showing the receipts, issues and balances both in quantities and cost of each item of intermediate material/service, process material, additives, bought out components, sub-assemblies, accessories, semi-finished goods, consumable stores, spares, other indirect materials/services etc. used in the production of the goods/rendering of services under reference. The cost shall include all direct charges upto works/services delivered. In case of
additives, bought out components/bought out services, sub-assemblies, accessories, semi-finished goods, consumable stores, spares and other indirect materials/services, proper records shall be maintained for the value and quantity issued/rendered in a financial year suitably adjusted for consumption. If the life of any input material/service is more than one financial year, necessary adjustment should be made. If the life of any input material/service is not known, consumption may be assessed on technical basis.

(3) Where the company produces these raw materials/input services, intermediates or process materials, separate records showing the cost of production/cost of service of such items, shall be maintained. The basis on which quantities and cost of issues and consumption of such materials/services produced or processed by the company are calculated, shall be indicated in the cost records and followed consistently.

(4) The issues, consumption of all raw materials/input services, intermediates, process materials, additives, manufactured, bought out components/ bought out services, subassemblies, accessories, semi-finished goods, consumable stores, spares and other indirect materials/services shall be identified with the process wise production of goods/rendering of services.

(5) Proper records shall be maintained indicating the quantity as well as value of recoveries at different stages/processes having significant value in relation to cost of material/service. In case the recoveries are not reused in the process and are sold/rendered or disposed of without further processing/rendering, the realisation from such sales shall be recorded and adjusted against the process concerned. In case further processing/augmentation is necessary to make the recoveries usable or saleable, as the case may be, proper records of the cost involved for such further processing/augmentation shall be maintained. If such processing/augmentation is done by any outside agency, proper records to show the quantity sent for processing/augmentation, quantity received back after processing/augmentation and cost incurred thereon shall be maintained. The net realization, if any, shall be adjusted against the major process relating to such recoveries. The cost of recoveries shall be determined on equitable and reasonable basis and applied consistently. The records indicating the actual sales realization of recoveries shall also be maintained.

(6) Proper records shall be maintained to show the receipts, issues and balances, both in quantities and cost of each item of consumable stores, other process materials/services not covered above, small tools and machinery spares, indirect materials/services etc. The cost shall include all direct charges upto works/services delivered.

(7) The cost of consumable stores, small tools and machinery spares shall be charged to the relevant cost center/service centre or department or production process of goods or rendering of services on the basis of actual issues. In the case of consumable stores and small tools, indirect services, the cost of which are insignificant (less than 5% of the cost of material consumed), the company may, if it so desires, maintain such records for the group of such consumable stores, tools and indirect services.

(8) Proper records shall be maintained showing the quantity and value of wastage, spoilage, rejections and losses of raw materials/input services, intermediates, process materials/services, consumable stores, small tools and machinery spares, whether in transit, storage, manufacture or at any other stage. The method followed for adjusting the above losses as well as the income derived from the disposal of rejected and waste materials/services including spoilage, if any, in determining the cost of good(s)/service(s), shall be indicated in the cost records. Any abnormal wastage or spoilage or rejection or losses shall be indicated distinctly and separately along with reasons thereof.

(9) Proper records shall also be maintained to indicate the value of raw materials/input services, intermediates and process materials/services, finished and semi-finished goods/services, consumable stores, small tools and machinery spares, additives, manufactured, bought out components/bought out services, sub-assemblies, accessories, semi-finished goods/services, consumable stores, spares and other indirect materials/services which have not moved/utilized for more than twelve months.

(10) Where any credit under Central Value Added Tax (CENVAT) under the Central Excise Act, 1944 (1 of 1944) or Finance Act in case of service tax, any other benefits of the nature of CENVAT/Service Tax credit, are available on any item of material/service, the cost of such material/service shall be shown after adjusting such credit or benefits.

(11) If any of the input materials/services is processed through an outside party, proper records shall be maintained for the quantity sent for processing, quantity received after processing, balance quantity of material/service, losses and wastage of material/service during processing, by-products recovered, if any, and the cost involved in processing/rendering of service.

2. SALARIES AND WAGES:

(1) Proper records shall be maintained to show the attendance and earnings of all employees assigned to the cost centres or departments and the work on which they are employed. The records shall also indicate the following separately for each cost centre or department:

(a) piece rate wages (wherever applicable);
(b) incentive wages, either individually or collectively as production bonus or under
any other scheme based on output;
(c) overtime wages;
(d) earnings of casual or contractual labour;
(e) bonus or gratuity, statutory as well as other;
(f) contribution to superannuating scheme;
(g) cost of employees stock option;
(h) leave travel concession;
(i) paid holidays;
(j) leave with pay;
(k) Training, workshop, seminar expenses;
(l) Medical/health, safety, education expenses;
(m) any other statutory provision for labour welfare;
(n) any other free or subsidized facility.

(2) The records shall be maintained in such a manner as to enable the company to book these expenses cost centre wise or department wise with reference to goods/services under reference and to furnish necessary particulars. Where the employees work in such a manner that it is not possible to identify them with any specific cost centre/service centre or department, the employees cost shall be apportioned to the cost centre/service centres or departments on equitable and reasonable basis and applied consistently.

(3) The idle labour cost shall be separately recorded under classified headings indicating the reasons therefor. The method followed for accounting of idle time payments shall be disclosed in the cost records.

(4) Any wages and salaries allocable to capital works, such as, additions to plant and machinery, buildings or other fixed assets shall be accounted for under the relevant capital heads. The method followed for accounting of such payments in determining the cost of the goods/services under reference shall be on equitable and reasonable basis and applied consistently. The said method shall be disclosed in the cost records also.

(5) The cost of normal retirement benefits payable to employees shall be recorded separately and charged to cost. The method followed for accounting of such costs in determining the cost of the goods/services under reference shall be on equitable and reasonable basis and applied consistently and disclosed separately. Termination benefits which are payable in addition to the normal retirement benefits, such as benefits under voluntary retirement scheme, expenses treated as abnormal and not forming part of salaries and wages and cost of production of goods/rendering of services.

3. UTILITIES:

(1) Proper records shall be maintained showing the quantity and cost of each major utility such as power, water, steam, effluent treatment, etc. produced and consumed by the different cost centres in such detail as to have particulars for each utility separately.

(2) If a utility is purchased, proper records showing the delivered cost including all direct charges shall be maintained for the quantity and value of each utility purchased.

(3) Where a utility is produced and supplied by any other unit of the company or any related party, proper records shall be maintained to assess cost and the quantity of the utility so procured.

(4) The cost of utility, if any, supplied to any other unit(s) of the company or any related party, shall be calculated on equitable and reasonable basis and applied consistently.

(5) The cost of utility allocated/apportioned to the cost centers and further to the individual goods/services shall be on equitable and reasonable basis and applied
consistently.

(6) Where any utility is one of the major inputs to the raw material used in production or manufacture of any of the goods/services under reference, such direct utility shall be included in the cost of such raw material/input service and shown accordingly.

(7) Proper records indicating any subsidy, grant/incentive, credits, recoveries, abnormal costs, penalties or damages paid etc. in respect of utilities shall be maintained.

(8) The records shall also indicate the measures taken on conservation of energy and its corresponding impact on per unit cost of goods/services.

4. SERVICE DEPARTMENT EXPENSES:
Proper records shall be maintained to indicate expenses incurred in respect of each service cost centre like engineering, work shop, designing, laboratory, safety, transport, computer cell, welfare etc. These expenses shall be apportioned to other services and production departments on equitable and reasonable basis and applied consistently. Where these services are utilized for other goods/services of the company also, the basis of apportionment of such expenses to goods/services under reference and to the other goods/services shall be on equitable and reasonable basis and applied consistently. The said basis shall be disclosed in the cost records also. Proper records shall be maintained to indicate cost of purchase, production, distribution, marketing and price of services with reference to sales to outside parties. Proper records shall also be maintained regarding cost of services received from/rendered to related parties and cost of service cost centre incurred in foreign exchange besides proper maintenance of records in respect of any subsidy, grants, incentives, credits/recoveries, any abnormal cost, penalty and damages.

5. REPAIRS AND MAINTENANCE:

(1) Proper records showing the expenditure incurred by the workshop, tool room and on repairs and maintenance in the various cost centres or departments shall be maintained under different heads. The records shall also indicate the basis of charging such expenses to different cost centres or departments. Records in respect of repairs and maintenance cost of jobs done in-house and outsourced, cost of major overhauls, repair and maintenance paid/payable to the related party, incurred in foreign exchange and any subsidy, grant, incentive, credits/recoveries, penalty and damages and any abnormal portion of this item of cost shall be maintained. The manner of charging a share of the cost of workshop, tool room and repairs and maintenance expenses shall be on equitable and reasonable basis and applied consistently.

(2) In addition to the above, records shall indicate the amount and also the proportion of closing inventory of stores and spare parts representing items which have not moved for over twenty four months.

(3) The expenditure on major repair works from which benefit is likely to accrue for more than one financial year shall be shown separately and absorbed in the cost over the period for which such benefits are expected to accrue on equitable and reasonable basis and applied consistently. Method of accounting along with the basis of allocation of such costs shall also be clearly indicated in cost records.

6. FIXED ASSETS, DEPRECIATION AND LEASE CHARGES:
(1) Proper and adequate records shall be maintained for assets used for production of goods/rendering of services under reference in respect of which depreciation has to be provided for. These records shall, interalia, indicate grouping of assets under each good/service, the cost of acquisition of each item of asset including installation charges, date of acquisition and rate of depreciation.

(2) Those records which enable to identify and/or allocate gross fixed assets, accumulated depreciation up to the year and net fixed assets under the heads; land and building, plant and machinery, furniture and fixtures etc. employed for goods/services under reference shall be maintained. The basis of apportionment of common assets to the goods/services under reference shall be on equitable and reasonable basis and applied consistently. In case of revaluation of assets, the same shall be indicated separately and depreciation on revaluation shall also be indicated separately.

(3) The basis on which depreciation is calculated and allocated or apportioned to various cost centre/service centres or departments and absorbed on all goods/services shall be clearly indicated in the cost records. If depreciation charged or chargeable to the cost centres or departments is in excess or lower than the depreciation calculated by applying the rates of depreciation prescribed under the Companies Act, 2013 , such amount of excess or lower depreciation shall be indicated clearly in the cost records. The cost records shall also show the effect of such excess or lower depreciation, as the case may be, on per unit cost of each good/service. The cumulative depreciation charged in the cost records, against any individual item of asset shall not, however, exceed the original cost of the respective asset.

(4) Proper records shall be maintained giving details of assets taken or given on lease. The breakup of lease rental in terms of financial charges, depreciation etc. paid or received shall be maintained separately. The details shall be maintained separately for assets taken from or given to related party.

7. OVERHEADS:

(1) Proper records shall be maintained for various items of indirect expenses comprising overheads pertaining to goods/services under reference. These expenses shall be analyzed, classified and grouped according to functions, namely, works, administration, selling and distribution, Head Office expenses.

(2) Proper records shall be maintained in respect of overheads incurred in foreign exchange, any subsidy, grant, incentive, credits/recoveries, unabsorbed overheads and any abnormal portion and also relating to resources received from or supplied to any related party,

(3) Where the company is also manufacturing goods/rendering services other than the goods/services under reference, the records shall clearly indicate the basis followed for apportionment of the common overheads including head office expenses of the company to such other goods/services and the goods/services under reference, including capital works. Where certain expenses forming part of overheads can be identified with particular goods/services, such expenses shall be first segregated and charged to the relevant goods/services in the first instance and thereafter the residual expenses under the above categories of overheads shall be apportioned on equitable and reasonable basis and applied consistently. The overheads chargeable to capital works shall be indicated separately in the cost records. The basis of apportionment or absorption of overheads to the cost centres or departments and the goods/services shall be indicated in the cost records. The records shall be maintained in such a manner as to indicate the details of works, administration, selling and distribution overheads, H.O. expenses etc.

8. ROYALTY AND TECHNICAL KNOW-HOW FEE:
Adequate records shall be maintained showing royalty and/or technical know-how fee including other recurring or non-recurring payments of similar nature, if any, made for the goods/services under reference to collaborators or technology suppliers in terms of agreements entered into with them. Such records shall be kept separately in respect of each such agreement or arrangement. The basis of charging such amount, including lump sum payment and its treatment shall be indicated in the cost records.

9. RESEARCH AND DEVELOPMENT EXPENSES:
(1) Proper records showing the details of expenses, if any, incurred by the company for research and development work on the goods/services covered under these rules, according to the nature of development of goods/services – existing and new, design and development of new facilities and market research for the existing and new goods/services, shall be maintained separately. The records shall also indicate the payments made to outside parties for the research and development work. The basis of charging such amount, including lump sum payment and its treatment shall be indicated in the cost records.

(2) The basis of charging these expenses to the cost of production of goods/services under reference and to other goods/services shall be indicated in the cost records. Where the utility of research and development work extends to over more than one financial year, such expenses shall be charged to the cost of goods/services under reference and to all other goods/services on equitable and reasonable basis and applied consistently indicating the criteria on the basis of which it has been decided to extend the utility period of these expenses to more than one financial year.

(3) Proper records shall be maintained in respect of such expenses incurred in foreign exchange and any subsidy, grant, incentive, credits/recoveries, penalty or damages
paid and any abnormal portion and also for resources received from or supplied to any related party.

(4) The expenses incurred by the research and development department for providing technical know-how to outsiders shall be recorded separately and excluded from the cost of goods/services under reference. The amount recovered for providing technical know-how to outsiders shall also be indicated separately and excluded from the income arising from the sale of goods/services under reference.

10. QUALITY CONTROL:
Adequate records shall be maintained to indicate the expenses incurred in respect of quality control department or cost centre/service centre for goods/services under reference. Where these services are also utilized for other goods/services of the company, the basis of apportionment to goods/services under reference and to other
goods/services shall be on equitable and reasonable basis and applied consistently. Proper records shall be maintained in respect of such expenses relating to resources received from or supplied to the related party, incurred in foreign exchange and any subsidy, grant, incentive, credits/recoveries, unabsorbed overheads and any abnormal portion etc.

11. WORK-IN-PROGRESS AND FINISHED STOCK:
The method followed for determining the cost of work-in-progress and finished stock of the goods and for services under delivery or in-process shall be appropriate and shall be indicated in the cost records so as to reveal the cost element that have been taken into account in such computation. All conversion costs incurred in bringing the inventories to their present location and condition shall be taken into account while computing the cost of work-in-progress and finished stock. The method adopted for determining the cost of work-in-progress and finished goods shall be followed consistently.

12. CAPTIVE CONSUMPTION:
If the goods/services under reference are used for captive consumption, proper records shall be maintained showing the quantity and cost of each such goods/services transferred to other departments or cost centres or units of the company for self-consumption and sold to outside parties separately.

13. BY-PRODUCTS:
Proper Records shall be maintained for each item of by-product, if any, produced showing the receipt, issues and balances, both in quantity and value. The basis adopted for valuation of by-product for giving credit to the respective process shall be equitable and consistent and should be indicated in cost records. Records showing the expenses incurred on further processing, if any, as well as actual sales realization of by-product shall be maintained. The proper records shall be maintained in respect of credits/recoveries from the disposal of by-products.

14. JOINT PRODUCTS/SERVICES:
Where more than one product/service which is of equal economic importance arises from a process, the cost up to the point of separation of products/services shall be apportioned to joint products/services on reasonable and equitable basis and shall be applied consistently. The basis on which such joint costs are apportioned to different products/services arising from the process shall be indicated in the cost records. Proper records shall be maintained in respect credits/recoveries from the disposal of joint products/services.

15. PACKING EXPENSES:
Proper records shall be maintained separately for domestic and export packing showing the quantity and cost of various packing materials and other expenses incurred on primary and/or secondary packing indicating the basis of valuation. Where such expenses are incurred in common for other goods also, the basis of apportioning the expenses between the relevant goods shall be on equitable and reasonable basis and applied consistently. Proper records shall be maintained in respect of packing materials received from or supplied to the related party, costs incurred in foreign exchange and any subsidy, grant, incentive, credits/recoveries, unabsorbed overheads, penalty and damages, any abnormal portion etc.

16. INTEREST AND OTHER BORROWING COSTS:
(1) Proper records shall be maintained for money borrowed for each project and/or working capital and interest charged thereon. The amount of net interest and other borrowing costs shall be allocated or apportioned to the goods/services under reference and other goods/services on equitable and reasonable basis and applied consistently. The basis of further charging of the share of interest to the various types of such goods/services shall also be equitable and reasonable and applied  consistently. The basis of such allocation or apportionment shall be spelt out clearly in the cost records.

(2) Net interest and other borrowing costs incurred for project under execution shall be capitalized for the period up to the date the project is commissioned.

(3) Proper records shall be maintained in respect of such expenses paid/payable to the related party, incurred in foreign exchange and any subsidy, grant, incentive and any amount of similar nature received/receivable, payment of penal interest or fine/damages paid.

(4) Proper records shall be maintained in respect of such expenses incurred relating to prior periods and taken to reconciliation directly.

17. EXPENSES OR INCENTIVES ON EXPORTS:
(1) Proper records showing the expenses incurred on the export sales, if any, of the goods/services under reference shall be separately maintained so that the cost of export sales can be determined correctly. Separate cost statements shall be prepared for goods/services exported giving details of export expenses incurred or incentive earned.

(2) Proper records shall be maintained giving the details of export commitments license wise and the fulfillment of these commitments giving the reasons for noncompliance, if any. In case, duty free imports are made, the cost statements should reflect this fact. If the duty free imports have been made after actual production, the statement should reflect this fact also.

18. POLLUTION CONTROL:
(1) Expenditure incurred by the company on various measures to protect the environment like effluent treatment, control of pollution of air, water, etc., should be properly recorded. Records relating to basis of distribution of pollution control expenses, such costs of jobs done in-house and outsourced separately, pollution control costs paid/payable to related parties, incurred in foreign exchange and any subsidy, grant, incentive, credits/recoveries, any abnormal portion of such costs, penalty and damages paid and any amount received/receivable from pollution control agency.

19. PRODUCTION RECORDS:
Quantitative records of all finished goods (packed or unpacked)/services rendered showing production, issues for sales and balances of different type of the goods/services under reference, shall be maintained. The quantitative details of production of goods/services rendered shall be maintained separately for self produced,
third party on job work, loan license basis etc.

20. SALES RECORDS:
Separate details of sales shall be maintained for domestic sales at control price, domestic sales at market price, export sales under advance license, export sales under other obligations, export sales at market price, and sales to related party/inter unit transfer. In case of services details of domestic delivery/sales at control price, domestic delivery/sales at market price, export delivery/sales under advance license, export delivery/sales under other obligations, export delivery/sales at market price, and delivery/sales to related party/inter unit transfer. Such details shall be maintained separately for each plant/unit wise or service centre wise for total as well as per unit sales realization.

21. ANY OTHER ITEM OF COST:
Proper records shall be maintained for any other item of cost being indispensable and considered necessary for inclusion in cost records for calculating cost of production of
goods/rendering of services, cost of sales, margin in total and per unit of the goods/services under reference.

22. ADJUSTMENT OF COST VARIANCES:
Where the company maintains cost records on any basis other than actual such as standard costing, the records shall indicate the procedure followed by the company in working out the cost of the goods/services under such system. The cost variances shall be shown against separate heads and analyzed into material, labour, overheads and further segregated into quantity, price and efficiency variances. The method followed for adjusting the cost variances in determining the actual cost of the goods/services shall be indicated clearly in the cost records. The reasons for the variances shall be duly explained in the cost records and statements.

23. COST STATEMENTS:
(1) Cost statements (quarterly and annually) showing quantitative information in respect of each good/service under reference shall be prepared showing details of available capacity, actual production, production as per excise records, capacity utilization (in-house), stock purchased for trading, stock and other adjustments, quantity available for sale, wastage and actual sale etc. during current financial year and previous year.

(2) Such statements shall also include details in respect of all major items of costs constituting cost of production of goods/services, cost of sales of goods/services and margin in total as well as per unit of the goods/services. The goods/services emerging from a process, which forms raw material or an input material/service for a subsequent process, shall be valued at the cost of production/cost of service up to the previous stage.

(3) Cost Statements (quarterly and annually)in respect of reconciliation of indirect taxes showing details of total clearances of goods/services, assessable value, duties/taxes paid, CENVAT/VAT/Service Tax credit utilized, duties/taxes recovered and interest/penalty paid.

(4) If the company is operating more than one plant, factory or service centre, separate cost statements as specified above shall be prepared in respect of each plant, factory or service centre.

(5) Any other statement/information considered necessary for suitable presentation of Costs and Profitability of goods/services produced by the Company shall also be prepared.

24. RECONCILIATION OF COST AND FINANCIAL ACCOUNTS:
(1) The cost statements shall be reconciled with the financial statements for the financial year specifically indicating the expenses or incomes not considered in the cost records or statements so as to ensure accuracy and to adjust the profit of the goods/services under reference with the overall profit of the company. The variations, if any, shall be clearly indicated and explained.

(2) A statement showing the total expenses incurred and income received by the company under different heads of accounts and the share applicable to other goods/services and the goods/services under reference shall be prepared and reconciled with the financial statement.

25. STATISTICAL RECORDS:
(1) The records regarding available machine hours or direct labour hours in different production departments and actually utilized shall be maintained for production of goods/rendering of services under reference and shortfall suitably analyzed. Suitable records for computation of idle time of machines and/or labour shall also be maintained and analyzed.

(2) Proper records shall be maintained to enable the company to identify the capital employed, net fixed assets and working capital separately for the production of goods/rendering of services under reference and other goods/services to the extent such elements are separately identifiable. Non-identifiable items shall be allocated on a suitable and reasonable basis to different goods/services. Fresh investments on fixed assets for production of goods/rendering of services under reference that have not contributed to the production of goods/rendering of services during the relevant period/year shall be indicated in the cost records. The records shall, in addition, show assets added as replacement and those added for increasing existing capacity.

26. RECORDS OF PHYSICAL VERIFICATION:
Records of physical verification may be maintained in respect of all items held in the stock such as raw-materials, process materials, packing materials, consumables stores, machinery spares, chemicals, fuels, finished goods and fixed assets etc. Reasons for shortages/surplus arising out of such verifications and the method followed for adjusting the same in the cost of the goods/services shall be indicated in the records.

27. RELATED PARTY TRANSACTIONS:
(1) In respect of related party transactions or supplies made or services rendered by a company to a company termed “related party relationship” and vice-a-versa, records shall be maintained showing contracts entered into, agreements or understanding
reached in respect of –

(a) purchase and sale of raw materials, finished good(s), rendering of service(s), process materials and rejected goods including scraps, etc;
(b) utilisation of plant facilities and technical know-how;
(c) supply of utilities and any other services;
(d) administrative, technical, managerial or any other consultancy services;
(e) purchase and sale of capital goods including plant and machinery; and
(f) any other payment related to the production of goods/rendering of services under reference.

(2) These records shall also indicate the basis followed for arriving at the rates charged or paid for such goods or services so as to enable determination of the reasonableness of such rates in so far as they are in any way related to goods/services under reference.


CRA-3 (FORM OF THE COST AUDIT REPORT)

Form CRA-3
[Pursuant to rule 6(4) of the Companies (Cost Records and Audit) Rules, 2014]
FORM OF THE COST AUDIT REPORT

I/We, …………………………………. having been appointed as Cost Auditor(s) under section 148(3)of the Companies Act, 2013(18 of 2013) of ………………………………………………. (mention name of the company) having its registered office at ……………………………….. (mention registered office address of the company) (hereinafter referred to as the company), have audited the Cost Records maintained under section 148 of the said Act, in compliance with the cost auditing standards, in respect of the …………………………… [mention name (s) of Product(s)/service(s)] for the period/year ……………………..(mention the financial year) maintained by the company and report, in addition to my/our observations and suggestions in para 2.

(i) I/We have/have not obtained all the information and explanations, which to the best of my/our knowledge and belief were necessary for the purpose of this audit.
(ii) In my/our opinion, proper cost records, as per rule 5 of the Companies (Cost Records and Audit) Rules, 2014 have/have not been maintained by the company in respect of product(s)/service(s) under reference.
(iii) In my/our opinion, proper returns adequate for the purpose of the cost audit have/have not been received from the branches not visited by me/us.
(iv) In my/our opinion and to the best of my/our information, the said books and records give/do not give the information required by the Companies Act, 2013, in the manner so required.
(v) In my/our opinion, the company has/does not have adequate system of internal audit of cost records which to my/our opinion is commensurate to its nature and size of its business.
(vi) In my/our opinion, information, statements in the annexure to this cost audit report gives/does not give a true and fair view of the cost of production of product(s)/rendering of service(s), cost of sales, margin and other information relating to product(s)/service(s) under reference.
(vii) Detailed unit-wise and product/service-wise cost statements and schedules thereto in respect of the product /service under reference of the company duly audited and certified by me/us are/are not kept in the company.

2. Observations and suggestions, if any, of the Cost Auditor, relevant to the cost audit.

Dated: this ____ day of _______ 20__
at ______ (mention name of place of signing this report)


CRA-4 (Form for filing Cost Audit Report with the Central Government.)


Form CRA 1(Substituted vide Companies (cost records and audit) Amendment Rules, 2017-Effective from 1 Apr.2016)

 FORM CRA – 1

Pursuant to rule 5(1) of the Companies (Cost Records and Audit) Rules, 2014)

Particulars relating to the Items of Costs to be included in the Books of Accounts

1. Material Costs-

(a) Proper records shall be maintained showing separately all receipts, issues and balances both in quantities and cost of each item of raw material or input services (including all direct charges) required for the production of goods or rendering of services under reference.

(b) The material receipt shall be valued at purchase price including duties and taxes, freight inwards, insurance, and other expenditure directly attributable to procurement (net of trade discounts, rebates, taxes and duties refundable or to be credited by the taxing authorities) that can be quantified with reasonable accuracy at the time of acquisition.

(c) Finance costs incurred in connection with the acquisition of materials shall not form part of material cost.

(d) Self-manufactured materials shall be valued including direct material cost, direct employee cost, direct expenses, factory overheads, share of administrative overheads relating to production but excluding share of other administrative overheads, finance cost and marketing overheads.

(e) Spares which are specific to an item of equipment shall not be taken to inventory, but shall be capitalized with the cost of the specific equipment. Cost of capital spares and or insurance spares, whether procured with the equipment or subsequently, shall be amortised over a period, not exceeding the useful life of the equipment.

(f) Normal loss or spoilage of material prior to reaching the factory or at places where the services are provided shall be absorbed in the cost of balance materials net of amounts recoverable from suppliers, insurers, carriers or recoveries from disposal.

(g) Losses due to shrinkage or evaporation and gain due to elongation or absorption of moisture etc., before the material is received shall be absorbed in material cost to the extent they are normal, with corresponding adjustment in the quantity.

(h) The forex component of imported material cost shall be converted at the rate on the date of the transaction. Any subsequent change in the exchange rate till payment or otherwise shall not form part of the material cost.

(i) Any demurrage or detention charges, or penalty levied by transport or other authorities shall not form part of the cost of materials.

(j) Subsidy or Grant or Incentive and any such payment received or receivable with respect to any material shall be reduced from cost for ascertainment of the cost of the cost object to which such amounts are related.

(k) Issues shall be valued using appropriate assumptions on cost flow, e.g. First-in-First-out, Last-in-First-out, Weighted Average Rate. The method of valuation shall be followed on a consistent basis.

(l) Where materials are accounted at standard cost, the price variances related to materials shall be treated as part of material cost.

(m) Any abnormal cost shall be excluded from the material cost.

(n) Wherever, material costs include transportation costs, determination of costs of transportation shall be governed by Para No. 9 on Determination of Cost of Transportation.

(o) Self-manufactured components and sub-assemblies shall be valued including direct material cost, direct employee cost, direct expenses, factory overheads, share of administrative overheads relating to production but excluding share of other administrative overheads, finance cost and marketing overheads.

(p) The material cost of normal scrap or defectives which are rejects shall be included in the material cost of goods manufactured. The material cost of actual scrap or defectives, not exceeding the normal shall be adjusted in the material cost of good production. Material Cost of abnormal scrap or defectives should not be included in material cost but treated as loss after giving credit to the realisable value of such scrap or defectives.

(q) Material costs shall be directly traced to a Cost object to the extent it is economically feasible or shall be assigned to the cost object on the basis of material quantity consumed or similar identifiable measure and valued as per above principles.

(r) Where the material costs are not directly traceable to the cost object, the same shall be assigned on a suitable basis like technical estimates.

(s) Where a material is processed or part manufactured by a third party according to specifications provided by the buyer, the processing or manufacturing charges payable to the third party shall be treated as part of the material cost.

(t) Wherever part of the manufacturing operations or activity is subcontracted, the subcontract charges related to materials shall be treated as direct expenses and assigned directly to the cost object.

(u) The cost of indirect materials shall be assigned to the various Cost objects based on a suitable basis such as actual usage or technical norms or a similar identifiable measure.

(v) The cost of materials like catalysts, dies, tools, moulds, patterns etc, which are relatable to production over a period of time shall be amortized over the production units benefited by such cost.

(w) The cost of indirect material with life exceeding one year shall be included in cost over the useful life of the material.

2. Employee Cost

a) Proper records shall be maintained in respect of employee costs in such a manner as to enable the company to book these expenses cost centre wise or department wise with reference to goods or services under reference and to furnish necessary particulars. Where the employees work in such a manner that it is not possible to identify them with any specific cost centre or service centre or department, the employees cost shall be apportioned to the cost centre or service centres or departments on equitable and reasonable basis and applied consistently.

b) Employee Cost shall be ascertained taking into account the gross pay including all allowances payable along with the cost to the employer of all the benefits.

c) Bonus whether payable as a Statutory Minimum or on a sharing of surplus shall be treated as part of employee cost. Ex gratia payable in lieu of or in addition to Bonus shall also be treated as part of the employee cost.

d) Remuneration payable to Managerial Personnel including Executive Directors on the Board and other officers of a corporate body under a statute shall be considered as part of the Employee Cost of the year under reference whether the whole or part of the remuneration is computed as a percentage of profits. Remuneration paid to non-executive directors shall not form part of Employee Cost but shall form part of Administrative Overheads.

e) Separation costs related to voluntary retirement, retrenchment, termination etc. shall be amortised over the period benefitting from such costs.

f) Employee cost shall not include imputed costs.

g) Cost of Idle time is ascertained by the idle hours multiplied by the hourly rate applicable to the idle employee or a group of employees.

h) Where Employee cost is accounted at standard cost, variances due to normal reasons related to Employee cost shall be treated as part of Employee cost. Variances due to abnormal reasons shall be treated as part of abnormal cost.

i) Any Subsidy, Grant, Incentive or any such payment received or receivable with respect to any Employee cost shall be reduced for ascertainment of cost of the cost object to which such amounts are related.

j) Any abnormal cost where it is material and quantifiable shall not form part of the Employee cost.

k) Penalties, damages paid to statutory authorities or other third parties shall not form part of the Employee cost.

l) The cost of free housing, free conveyance and any other similar benefits provided to an employee shall be determined at the total cost of all resources consumed in providing such benefits.

m) Any recovery from the employee towards any benefit provided, namely, housing shall be reduced from the employee cost.

n) Any change in the cost accounting principles applied for the determination of the Employee cost should be made only if it is required by law or for compliance with the requirements of a cost accounting standard or a change would result in a more appropriate preparation or presentation of cost statements of an enterprise.

o) Where the Employee services are traceable to a cost object, such Employees’ cost shall be assigned to the cost object on the basis such as time consumed or number of employees engaged etc. or similar identifiable measure.

p) While determining whether a particular Employee cost is chargeable to a separate cost object, the principle of materiality shall be adhered to.

q) Where the Employee costs are not directly traceable to the cost object, these may be assigned on suitable basis like estimates of time based on time study.

r) The amortised separation costs related to voluntary retirement, retrenchment, and termination etc. for the period shall be treated as indirect cost and assigned to the cost objects in an appropriate manner. However unamortised amount related to discontinued operations, shall not be treated as employee cost.

s) Recruitment costs, training cost and other such costs shall be treated as overheads and dealt with accordingly.

t) Overtime premium shall be assigned directly to the cost object or treated as overheads depending on the economic feasibility and the specific circumstance requiring such overtime.

u) Idle time cost shall be assigned direct to the cost object or treated as overheads depending on the economic feasibility and the specific circumstances causing such idle time.

3. Utilities

a) Proper records shall be maintained showing the quantity and cost of each major utility such as power, water, steam, effluent treatment, etc. produced and consumed by the different cost centres in such detail as to have particulars for each utility separately.

b) Each type of utility shall be treated as a distinct cost object.

c) Cost of utilities purchased shall be measured at cost of purchase including duties and taxes, transportation cost, insurance and other expenditure directly attributable to procurement (net of trade discounts, rebates, taxes and duties refundable or to be credited) that can be quantified with reasonable accuracy at the time of acquisition.

d) Cost of self-generated utilities for own consumption shall comprise direct material cost, direct employee cost, direct expenses and factory overheads.

e) In case of Utilities generated for the purpose of inter unit transfers, the distribution cost incurred for such transfers shall be added to the cost of utilities determined as above.

f) Cost of Utilities generated for the intercompany transfers shall comprise direct material cost, direct employee cost, direct expenses, factory overheads, distribution cost and share of administrative overheads.

g) Cost of Utilities generated for the sale to outside parties shall comprise direct material cost, direct employee cost, direct expenses, factory overheads, distribution cost, share of administrative overheads and marketing overheads. The sale value of such utilities shall also include the margin.

h) Finance costs incurred in connection with the utilities shall not form part of cost of utilities.

i) The cost of utilities shall include the cost of distribution of such utilities. The cost of distribution will consist of the cost of delivery of utilities up to the point of consumption.

j) Cost of utilities shall not include imputed costs.

k) Where cost of utilities is accounted at standard cost, the price variances related to utilities shall be treated as part of cost of utilities and the portion of usage variances due to normal reasons shall be treated as part of cost of utilities. Usage variances due to abnormal reasons shall be treated as part of abnormal cost.

l) Any Subsidy or Grant or Incentive or any such payment received or receivable with respect to any cost of utilities shall be reduced for ascertainment of the cost to which such amounts are related.

m) The cost of production and distribution of utilities shall be determined based on the normal capacity or actual capacity utilization whichever is higher and unabsorbed cost, if any, shall be treated as abnormal cost. Cost of a Stand-by Utility shall include the committed costs of maintaining such a utility.

n) Any abnormal cost where it is material and quantifiable shall not form part of the cost of utilities.

o) Penalties, damages paid to statutory authorities or other third parties shall not form part of the cost of utilities.

p) Credits or recoveries relating to the utilities including cost of utilities provided to outside parties, material and quantifiable, shall be deducted from the total cost of utility to arrive at the net cost of utility.

q) Any change in the cost accounting principles applied for the measurement of the cost of utilities shall be made only if, it is required by law or for compliance with the requirements of a cost accounting standard, or a change would result in a more appropriate preparation or presentation of cost statements of an organisation.

r) While assigning cost of utilities, traceability to a cost object in an economically feasible manner shall be the guiding principle.

s) Where the cost of utilities is not directly traceable to cost object, it shall be assigned on the most appropriate basis.

t) The most appropriate basis of distribution of cost of a utility to the departments consuming services is to be derived from usage parameters.

4. Direct Expenses

a) Proper records shall be maintained in respect of direct expenses in such a manner as to enable company to book these expenses cost centre wise or cost abject or department wise with reference to goods or services under reference and to furnish necessary particulars.

b) Direct expenses incurred for the use of bought out resources shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of trade discounts, rebates, taxes and duties refundable or to be credited.

c) Other expenses shall be determined on the basis of amount incurred in connection therewith.

d) Direct Expenses paid or incurred in lump-sum or which are in the nature of ‘one – time’ payment, shall be amortised on the basis of the estimated output or benefit to be derived from such direct expenses.

e) If an item of Direct Expenses does not meet the test of materiality, it can be treated as part of overheads.

f) Finance costs incurred in connection with the self-generated or procured resources shall not form part of Direct Expenses. Direct Expenses shall not include imputed costs.

g) Where direct expenses are accounted at standard cost, variances due to normal reasons shall be treated as part of the Direct Expenses. Variances due to abnormal reasons shall not form part of the Direct Expenses.

h) Any Subsidy or Grant or Incentive or any such payment received or receivable with respect to any Direct Expenses shall be reduced for ascertainment of the cost of the cost object to which such amounts are related.

i) Any abnormal portion of the direct expenses where it is material and quantifiable shall not form part of the Direct Expenses.

j) Penalties, damages paid to statutory authorities or other third parties shall not form part of the Direct Expenses.

k) Credits or recoveries relating to the Direct Expenses, material and quantifiable, shall be deducted to arrive at the net Direct Expenses.

l) Any change in the cost accounting principles applied for the measurement of the Direct Expenses should be made only if, it is required by law or for compliance with the requirements of a cost accounting standard, or a change would result in a more appropriate preparation or presentation of cost statements of an organisation.

m) Direct Expenses that are directly traceable to the cost object shall be assigned to that cost object.

5. Repairs and Maintenance

a) Proper records showing the expenditure incurred by the workshop, tool room and on repairs and maintenance in the various cost centres or departments shall be maintained under different heads.

b) Repairs and maintenance cost shall be the aggregate of direct and indirect cost relating to repairs and maintenance activity. Direct cost shall include the cost of materials, consumable stores, spares, manpower, equipment usage, utilities and other identifiable resources consumed in such activity. Indirect cost shall include the cost of resources common to various repairs and maintenance activities such as manpower, equipment usage and other costs allocable to such activities.

c) Cost of in-house repairs and maintenance activity shall include cost of materials, consumable stores, spares, manpower, equipment usage, utilities, and other resources used in such activity.

d) Cost of repairs and maintenance activity carried out by outside contractors inside the entity shall include charges payable to the contractor and cost of materials, consumable stores, spares, manpower, equipment usage, utilities, and other costs incurred by the entity for such jobs.

e) Cost of repairs and maintenance jobs carried out by contractor at its premises shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other than cash discount), taxes and duties refundable or to be credited. This cost shall also include the cost of other resources provided to the contractors.

f) Cost of repairs and maintenance jobs carried out by outside contractors shall include charges made by the contractor and cost of own materials, consumable stores, spares, manpower, equipment usage, utilities and other costs used in such jobs.

g) Each type of repairs and maintenance shall be treated as a distinct activity, if material and identifiable.

h) Cost of repairs and maintenance activity shall be measured for each major asset category separately.

i) Cost of spares replaced which do not enhance the future economic benefits from the existing asset beyond its previously assessed standard of performance shall be included under repairs and maintenance cost.

j) High value spare, when replaced by a new spare and is reconditioned, which is expected to result in future economic benefits, the same shall be taken into stock. Such a spare shall be valued at an amount that measures its service potential in relation to a new spare which amount shall not exceed the cost of reconditioning the spare. The difference between the total of the cost of the new spare and the reconditioning cost and the value of the reconditioned spare should be treated as repairs and maintenance cost.

k) The cost of major overhaul shall be amortized on a rational basis.

l) Finance costs incurred in connection with the repairs and maintenance activities shall not form part of Repairs and maintenance costs.

m) Repairs and maintenance costs shall not include imputed costs.

n) Price variances related to repairs and maintenance, where standard costs are in use, shall be treated as part of repairs and maintenance cost. The portion of usage variances attributable to normal reasons shall be treated as part of repairs and maintenance cost. Usage variances attributable to abnormal reasons shall be excluded from repairs and maintenance cost.

o) Subsidy or Grant or Incentive or amount of similar nature received or receivable with respect to repairs and maintenance activity, if any, shall be reduced for ascertainment of the cost of the cost object to which such amounts are related.

p) Any repairs and maintenance cost resulting from some abnormal circumstances, e.g., major fire, explosions, flood and similar events, if material and quantifiable, shall not form part of the repairs and maintenance cost.

q) Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the repairs and maintenance cost.

r) Credits or recoveries relating to the repairs and maintenance activity, material and quantifiable, shall be deducted to arrive at the net repairs and maintenance cost.

s) Any change in the cost accounting principles applied for the measurement of the repairs and maintenance cost should be made only if, it is required by law or for compliance with the requirements of a cost accounting standard, or a change would result in a more appropriate preparation or presentation of cost statements of an organisation.

t) Repairs and maintenance costs shall be traced to a cost object to the extent economically feasible.

u) Where the repairs and maintenance cost is not directly traceable to cost object, it shall be assigned based on either of the following the principles of (1) Cause and Effect – Cause is the process or operation or activity and effect is the incurrence of cost and (2) Benefits received – overheads are to be apportioned to the various cost objects in proportion to the benefits received by them.

v) If the repairs and maintenance cost (including the share of the cost of reciprocal exchange of services) is shared by several cost objects, the related cost shall be measured as an aggregate and distributed among the cost objects.

6. Fixed Assets and Depreciation

a) Proper and adequate records shall be maintained for assets used for production of goods or rendering of services under reference in respect of which depreciation has to be provided for. These records shall, interalia, indicate grouping of assets under each good or service, the cost of acquisition of each item of asset including installation charges, date of acquisition and rate of depreciation.

b) Depreciation and Amortisation shall be measured based on the depreciable amount and the useful life. The residual value of an intangible asset shall be assumed to be zero unless:

i) there is a commitment by a third party to purchase the asset at the end of its useful life; or

ii) there is an active market for the asset and:

a. residual value can be determined by reference to that market; and

b. it is probable that such a market will exist at the end of the asset’s useful life.

c. The residual value of a fixed asset shall be considered as zero if the entity is unable to estimate the same with reasonable accuracy.

c) The minimum amount of depreciation to be provided shall not be less than the amount calculated as per principles and methods as prescribed by any law or regulations applicable to the entity and followed by it.

d) In case of regulated industry the amount of depreciation shall be the same as prescribed by the concerned regulator.

e) While estimating the useful life of a depreciable asset, consideration shall be given to the following factors:

i) Expected physical wear and tear;

ii) Obsolescence; and

iii) Legal or other limits on the use of the asset.

f) The useful life of an intangible asset that arises from contractual or other legal rights shall not exceed the period of the contractual or other legal rights, but may be shorter depending on the period over which the entity expects to use the asset.

g) If the contractual or other legal rights are conveyed for a limited term that can be renewed, the useful life of the intangible asset shall include the renewal period(s) only if there is evidence to support renewal by the entity without significant cost. The useful life of a re-acquired right recognised as an intangible asset in a business combination is the remaining contractual period of the contract in which the right was granted and shall not include renewal periods.

h) The useful life of an intangible asset, in any situation, shall not exceed 10 years from the date it is available for use.

i) Depreciation shall be considered from the time when a depreciable asset is first put into use. An asset which is used only when the need arises but is always held ready for use. Example: fire extinguisher, stand by generator, safety equipment shall be considered to be an asset in use. Depreciable assets will be considered to be put into use when commercial production of goods and services commences.

j) Depreciation on an asset which is temporarily retired from production of goods and services shall be considered as abnormal cost for the period when the asset is not in use.

k) Depreciation of any addition or extension to an existing depreciable asset which becomes an integral part of that asset shall be based on the remaining useful life of that asset.

l) Depreciation of any addition or extension to an existing depreciable asset which retains a separate identity and is capable of being used after the expiry of the useful life of that asset shall be based on the estimated useful life of that addition or extension.

m) The impact of higher depreciation due to revaluation of assets shall not be assigned to cost object.

n) Impairment loss on assets shall be excluded from cost of production.

o) The method of depreciation used shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity.

p) An entity can use any of the methods of depreciation to assign depreciable amount of an asset on a systematic basis over its useful life, viz., Straight-line method; Diminishing balance method; and Units of production method.

q) The method of amortisation of intangible asset shall reflect the pattern in which the economic benefits accrue to entity.

r) The methods and rates of depreciation applied shall be reviewed at least annually and, if there has been a change in the expected pattern of consumption or loss of future economic benefits, the method applied shall be changed to reflect the changed pattern.

s) Spares purchased specifically for a particular asset, or class of assets, and which would become redundant if that asset or class of asset was retired or use of that asset was discontinued, shall form part of that asset. The depreciable amount of such spares shall be allocated over the useful life of the asset.

t) Cost of small assets shall be written off in the period in which they were purchased as per the accounting policy of the entity.

u) Depreciation of an asset shall not be considered in case cumulative depreciation exceeds the original cost of the asset, net of residual value.

v) Where depreciation for an addition of an asset is measured on the basis of the number of days for which the asset was used for the preparation and presentation of financial statements, depreciation of the asset for assigning to cost of object shall be measured in relation to the period, the asset actually utilized.

w) Depreciation shall be traced to the cost object to the extent economically feasible.

x) Where the depreciation is not directly traceable to cost object, it shall be assigned based on either of the following two principles, namely;

i) Cause and Effect – Cause is the process or operation or activity and effect is the incurrence of cost and

ii) Benefits received – overheads are to be apportioned to the various cost objects in proportion to the benefits received by them.

7. Overheads

a) Proper records shall be maintained for various items of indirect expenses comprising overheads pertaining to goods or services under reference. These expenses shall be analysed, classified and grouped according to functions.

b) Overheads representing procurement of resources shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other than cash discounts), taxes and duties refundable or to be credited.

c) Overheads other than those referred to above shall be determined on the basis of cost incurred in connection therewith.

d) Any abnormal cost where it is material and quantifiable shall not form part of the overheads.

e) Finance costs incurred in connection with procured or self-generated resources shall not form part of overheads.

f) Overheads shall not include imputed cost.

g) Overhead variances attributable to normal reasons shall be treated as part of overheads. Overhead variances attributable to abnormal reasons shall be excluded from overheads.

h) Any subsidy or Grant or Incentive or amount of similar nature received or receivable with respect to overheads shall be reduced for ascertainment of the cost of the cost object to which such amounts are related.

i) Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the overheads.

j) Credits or recoveries relating to the overheads, material and quantifiable, shall be deducted from the total overhead to arrive at the net overheads. Where the recovery exceeds the total overheads, the balance recovery shall be treated as other income.

k) Any change in the cost accounting principles applied for the measurement of the overheads shall be made only if, it is required by law or for compliance with the requirements of a cost accounting standard, or a change would result in a more appropriate preparation or presentation of cost statements of an entity.

l) While assigning overheads, traceability to a cost object in an economically feasible manner shall be the guiding principle. The cost which can be traced directly to a cost object shall be directly assigned.

Overheads shall be classified according to functions, viz., works, administration, selling and distribution. Works overheads, also known as Production Overheads, Operation Overheads, Factory Overheads or Manufacturing Overheads, shall be the indirect costs involved in the production of a product or in providing service. Administrative overheads shall be the aggregate of cost of resources consumed in activities relating to general management and administration of an organisation. Selling and Distribution overheads shall be the aggregate of cost of resources consumed in the selling and distribution activities of the organization.

m) Overheads shall be classified according to functions, viz., works, administration, selling & distribution, head office, corporate etc.

n) Assignment of overheads to the cost objects shall be based on either of the following two principles; (1) Cause and Effect – Cause is the process or operation or activity and effect is the incurrence of cost and (2) Benefits received – overheads are to be apportioned to the various cost objects in proportion to the benefits received by them.

o) The variable production overheads shall be absorbed to products or services based on actual capacity utilisation.

p) The fixed production overheads shall be absorbed based on the normal capacity.

In case of leased assets, if the lease is an operating lease, the entire rentals shall be included in the respective overheads. If the lease is a financial lease, the finance cost portion shall be segregated and treated as part of finance costs.

Selling and Distribution Overheads, the benefits of which are expected to be derived over a long period, shall be amortized on a rational basis.

 Any demurrage or detention charges or penalty levied by the transportation or other authorities in respect of distribution activity shall not form part of Selling and Distribution Overheads.

q) Assignment of Administration Overheads shall be in accordance with para no. 8.

r) Marketing Overheads that can be identified to a product or service shall be assigned to that product or service.

s) Marketing Overheads that cannot be identified to a product or service shall be assigned to the products or services on the most appropriate basis.

a) Administrative overheads shall be the aggregate of cost of resources consumed in activities relating to general management and administration of an organisation.

b) In case of leased assets, if the lease is an operating lease, the entire rentals shall be included in the administrative overheads. If the lease is a financial lease, the finance cost portion shall be segregated and treated as part of finance costs.

c) The cost of software (developed in house, purchased, licensed or customised), including up-gradation cost shall be amortised over its estimated useful life.

d) The cost of administrative services procured from outside shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other than cash discount), taxes and duties refundable or to be credited.

e) Any Subsidy or Grant or Incentive or any amount of similar nature received or receivable with respect to any Administrative overheads shall be reduced for ascertainment of the cost of the cost object to which such amounts are related.

f) Administrative overheads shall not include any abnormal administrative cost.

g) Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the administrative overheads.

h) Credits or recoveries relating to the administrative overheads including those rendered without any consideration, material and quantifiable, shall be deducted to arrive at the net administrative overheads.

i) Any change in the cost accounting principles applied for the measurement of the administrative overheads should be made only if it is required by law or for compliance with the requirements of a cost accounting standard or a change would result in a more appropriate preparation or presentation of cost statements of an organisation.

j) While assigning administrative overheads, traceability to a cost object in an economically feasible manner shall be the guiding principle.

k) Assignment of administrative overheads to the cost objects shall be based on either of the following two principles;

(i) Cause and Effect – Cause is the process or operation or activity and effect is the incurrence of cost.

(ii) Benefits received – overheads are to be apportioned to the various cost objects in proportion to the benefits received by them.

9. Transportation Cost

a) Proper records shall be maintained for recording the actual cost of transportation showing each element of cost such as freight, cartage, transit insurance and others after adjustment for recovery of transportation cost. Abnormal costs relating to transportation, if any, are to be identified and recorded for exclusion of computation of average transportation cost.

b) In case of a manufacturer having his own transport fleet, proper records shall be maintained to determine the actual operating cost of vehicles showing details of various elements of cost such as salaries and wages of driver, cleaners and others, cost of fuel, lubricant grease, amortized cost of tyres and battery, repairs and maintenance, depreciation of the vehicles, distance covered and trips made, goods hauled and transported to the depot.

c) In case of hired transport charges incurred for despatch of goods, complete details shall be recorded as to date of despatch, type of transport used, description of the goods, destination of buyer, name of consignee, challan number, quantity of goods in terms of weight or volume, distance involved, amount paid and other related details.

d) Records shall be maintained separately for inward and outward transportation cost specifying the details particulars of goods despatched, name of supplier or recipient, amount of freight etc.

e) Separate records shall be maintained for identification of transportation cost towards inward movement of material (procurement) and transportation cost of outward movement of goods removed or sold for both home consumption and export.

f) Records for transportation cost from factory to depot and thereafter shall be maintained separately.

g) Records for transportation cost for carrying any material or product to job-workers place and back shall be maintained separately so as include the same in the transaction value of the product.

h) Records for transportation cost for goods involved exclusively for trading activities shall be maintained separately and the same shall not be included for claiming any deduction for calculating assessable value excisable goods cleared for home consumption.

i) Records of transportation cost directly allocable to a particular category of products shall be maintained separately so that allocation can be made.

j) For common transportation cost both for own fleet or hired ones, proper records for basis of apportionment shall be maintained.

 Records for transportation costs for exempted goods, taxable goods cleared for export shall be maintained separately.

k) Records for transportation cost for exempted goods, excisable goods cleared for export shall be maintained separately.

l) Separate records of cost for mode of transportation other than road like ship or air are to be maintained, which shall be included in total cost of transportation.

m) Inward transportation costs shall form the part of the cost of procurement of materials which are to be identified for proper allocation or apportionment to the materials or products.

n) Outward transportation cost shall form the part of the cost of sale and shall be allocated or apportioned to the materials and goods on a suitable basis.

o) The following basis shall be used, in order of priority, for apportionment of outward transportation cost depending upon the nature of products, unit of measurement followed and type of transport used:

i) Weight

ii) Volume of goods

iii) Tonne-Km

iv) Unit or Equivalent unit

v) Value of goods

vi) Percentage of usage of space

p) Once a basis of apportionment is adopted, the same shall be followed consistently.

q) For determining the transportation cost per unit, distance shall be factored in to arrive at weighted average cost.

r) Abnormal and non-recurring cost shall not be a part of transportation cost.

10. Royalty and Technical Know-how

a) Adequate records shall be maintained showing royalty and or or technical know-how fee including other recurring or non-recurring payments of similar nature, if any, made for the goods or services under reference to collaborators or technology suppliers in terms of agreements entered into with them.

b) Royalty and Technical Know-how Fee paid or incurred in lump-sum or which are in the nature of ‘one–time’ payment, shall be amortised on the basis of the estimated output or benefit to be derived from the related asset. Amortisation of the amount of Royalty or Technical Know-how fee paid for which the benefit is ensued in the current or future periods shall be determined based on the production or service volumes estimated for the period over which the asset is expected to benefit the entity.

c) Amount of the Royalty and Technical Know-how Fee shall not include finance costs and imputed costs.

d) Any Subsidy or Grant or Incentive or any such payment received or receivable with respect to amount of Royalty and Technical Know-how fee shall be reduced to measure the amount of royalty and technical knowhow fee.

e) Penalties, damages paid to statutory authorities or other third parties shall not form part of the amount of Royalty and Technical Know-how fee.

f) Credits or recoveries relating to the amount Royalty and Technical Know-how fee, material and quantifiable, shall be deducted to arrive at the net amount of Royalty and Technical Know-how fee.

g) Any change in the cost accounting principles applied for the measurement of the amount of Royalty and Technical Know-how Fee should be made only if, it is required by law or for compliance with the requirements of a cost accounting standard, or a change would result in a more appropriate preparation or presentation of cost statements of an organisation.

h) Royalty and Technical Know-how fee that is directly traceable to a cost object shall be assigned to that cost object. In case such fee is not directly traceable to a cost object then it shall be assigned on any of the following basis: i) Units produced ii) Units sold iii) Sales value

i) The amount of Royalty fee paid for mining rights shall form part of the cost of material.

j) The amount of Royalty and Technical Know-how fee shall be assigned on the nature or purpose of such fee. The amount of royalty and technical know-how fee related to product or process know how shall be treated as cost of production; if it is related to trademarks or brands shall be treated as cost of sales.

11. Research and Development Expenses

a) Research, and Development Costs shall include all the costs that are directly traceable to research and or or development activities or that can be assigned to research and development activities strictly on the basis of a) cause and effect or b) benefits received. Such costs shall include the following elements:

i. The cost of materials and services consumed in Research and Development activities.

ii. Cost of bought out materials and hired services as per invoice or agreed price including duties and taxes directly attributable thereto net of trade discounts, rebates, taxes and duties refundable or to be credited.

iii. The salaries, wages and other related costs of personnel engaged in Research, and Development activities;

iv. The depreciation of equipment and facilities, and other tangible assets, and amortisation of intangible assets to the extent that they are used for Research, and Development activities;

v. Overhead costs, other than general administrative costs, related to Research and Development activities.

vi. Costs incurred for carrying out Research, and Development activities by other entities and charged to the entity; and

vii. Expenditure incurred in securing copyrights or licences

viii. Expenditure incurred for developing computer software

ix. Costs incurred for the design of tools, jigs, moulds and dies

x. Other costs that can be directly attributed to Research, and Development activities and can be identified with specific projects.

b) Subsidy or Grant or Incentive or amount of similar nature received or receivable with respect to Research and Development Activity, if any, shall be reduced from the cost of such Research and Development Activity.

c) Any abnormal cost where it is material and quantifiable shall not form part of the Research and Development Cost.

d) Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the Research, and Development Cost.

e) Research and Development costs shall not include imputed costs.

f) Credits or recoveries relating to Research, and Development cost, if material and quantifiable, including from the sale of output produced from the Research and Development activity shall be deducted from the Research and Development cost.

g) Research and Development costs attributable to a specific cost object shall be assigned to that cost object directly. Research & development costs that are not attributable to a specific product or process shall not form part of the product cost.

h) Development cost which results in the creation of an intangible asset shall be amortised over its useful life. Assignment of Development Costs shall be based on the principle of “benefits received”

i) Research and Development Costs incurred for the development and improvement of an existing process or product shall be included in the cost of production. In case the Research and Development activity related to the improvement of an existing process or product continues for more than one accounting period, the cost of the same shall be accumulated and amortised over the estimated period of use of the improved process or estimated period over which the improved product will be produced by the entity after the commencement of commercial production, as the case may be, if the improved process or product is distinctly different from the existing process or product and the product is marketed as a new product. The amount allocated to a particular period shall be included in the cost of production of that period. If the expenditure is only to improve the quality of the existing product or minor modifications in attributes, the principle shall not be applied.

j) Development costs attributable to a saleable service namely; providing technical know-how to outside parties shall be accumulated separately and treated as cost of providing the service.

12. Quality Control Expenses

a) Adequate records shall be maintained to indicate the expenses incurred in respect of quality control department or cost centre or service centre for goods or services under reference. Where these services are also utilized for other goods or services of the company, the basis of apportionment to goods or services under reference and to other goods or services shall be on equitable and reasonable basis and applied consistently.

b) Quality Control cost incurred in-house shall be the aggregate of the cost of resources  consumed in the Quality Control activities of the entity. The cost of resources procured from outside shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other than cash discounts), taxes and duties refundable or to be credited by the Tax Authorities. Such cost shall include: Cost of conformance to quality:

(a) prevention cost; and

(b) appraisal cost.

c) Identification of Quality Control costs shall be based on traceability in an economically feasible manner.

d) Quality Control costs other than those referred to above shall be determined on the basis of amount incurred in connection therewith.

e) Finance costs incurred in connection with the self-generated or procured resources shall not form part of Quality Control cost.

f) Quality Control costs shall not include imputed costs.

g) Any Subsidy or Grant or Incentive or any such payment received or receivable with respect to any Quality Control cost shall be reduced for ascertainment of the cost of the cost object to which such amounts are related.

h) Any abnormal portion of the Quality Control cost where it is material and quantifiable shall not form part of the Cost of Quality Control.

i) Penalties, damages paid to statutory authorities or other third parties shall not form part of the Quality Control cost.

j) Any change in the cost accounting principles applied for the measurement of the Quality Control cost shall be made only if, it is required by law or for compliance with the requirements of a cost accounting standard, or a change would result in a more appropriate preparation or presentation of cost statements of an organisation.

k) Quality Control cost that is directly traceable to the cost object shall be assigned to that cost object. Assignment of Quality Control cost to the cost objects shall be based on benefits received by them on the principles, namely;

(i) Cause and Effect – Cause is the process or operation or activity and effect is the incurrence of cost and

(ii) Benefits received – overheads are to be apportioned to the various cost objects in proportion to the benefits received by them.

13. Pollution Control Expenses

a) Adequate records shall be maintained to indicate the expenses incurred in respect of  pollution control. The basis of apportionment to goods or services under reference and to other goods or services shall be on equitable and reasonable basis and applied consistently.

b) Pollution Control costs shall be the aggregate of direct and indirect cost relating to  Pollution Control activity. Direct cost shall include the cost of materials, consumable stores, spares, manpower, equipment usage, utilities, resources for testing & certification and other identifiable resources consumed in activities such as waste processing, disposal  remediation and others. Indirect cost shall include the cost of resources common to various Pollution Control activities such as Pollution Control Registration and such like expenses.

c) Costs of Pollution Control which are internal to the entity should be accounted for when incurred. They should be measured at the historical cost of resources consumed.

d) Future remediation or disposal costs which are expected to be incurred with reasonable certainty as part of Onerous Contract or Constructive Obligation, legally enforceable shall be estimated and accounted based on the quantum of pollution generated in each period and the associated cost of remediation or disposal in future.

e) Contingent future remediation or disposal costs e.g. those likely to arise on account of future legislative changes on pollution control shall not be treated as cost until the  incidence of such costs become reasonably certain and can be measured.

f) External costs of pollution which are generally the costs imposed on external parties including social costs are difficult to estimate with reasonable accuracy and are excluded from general purpose cost statements.

g) Social costs of pollution are measured by economic models of cost measurement. The cost by way of compensation by the polluting entity either under future legislation or under social pressure cannot be quantified by traditional models of cost measurement. They are best kept out of general purpose cost statements.

h) Cost of in-house Pollution Control activity shall include cost of materials, consumable stores, spares, manpower, equipment usage, utilities, and other resources used in such activity.

i) Cost of Pollution Control activity carried out by outside contractors inside the entity shall include charges payable to the contractor and cost of materials, consumable stores, spares, manpower, equipment usage, utilities, and other costs incurred by the entity for such jobs.

j) Cost of Pollution Control jobs carried out by contractor at its premises shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other than cash discount), taxes and duties refundable or to be credited. This cost shall also include the cost of other resources provided to the contractors.

k) Cost of Pollution Control jobs carried out by outside contractors shall include charges made by the contractor and cost of own materials, consumable stores, spares, manpower, equipment usage, utilities and other costs used in such jobs.

l) Each type of Pollution Control e.g. water, air, soil pollution shall be treated as a distinct activity, if material and identifiable.

m) Finance costs incurred in connection with the Pollution Control activities shall not form part of Pollution Control costs.

n) Pollution Control costs shall not include imputed costs.

o) Price variances related to Pollution Control, where standard costs are in use, shall be treated as part of Pollution Control cost. The portion of usage variances attributable to normal reasons shall be treated as part of Pollution Control cost. Usage variances attributable to abnormal reasons shall be excluded from Pollution Control cost.

p) Subsidy or Grant or Incentive or amount of similar nature received or receivable with respect to Pollution Control activity, if any, shall be reduced for ascertainment of the cost of the cost object to which such amounts are related.

q) Any Pollution Control cost resulting from abnormal circumstances, if material and quantifiable, shall not form part of the Pollution Control cost.

r) Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the Pollution Control cost.

s) Credits or recoveries relating to the Pollution Control activity, material and quantifiable, shall be deducted to arrive at the net Pollution Control cost.

t) Research and development cost to develop new process, new products or use of new materials to avoid or mitigate pollution shall be treated as research and development costs and not included under pollution control costs. Development costs incurred for commercial development of such product, process or material shall be included in pollution control costs.

u) Any change in the cost accounting principles applied for the measurement of the Pollution Control cost should be made only if, it is required by law or for compliance with the requirements of a cost accounting standard, or a change would result in a more appropriate preparation or presentation of cost statements of an organisation.

v) Pollution Control costs shall be traced to a cost object to the extent economically feasible.

w) Direct costs of pollution control such as treatment and disposal of waste shall be assigned directly to the product, where traceable economically.

x) Where these costs are not directly traceable to the product but are traceable to a process which causes pollution, the costs shall be assigned to the products passing through the process based on the quantity of the pollutant generated by the product.

y) Where the Pollution Control cost is not directly traceable to cost object, it shall be treated as overhead and assigned based on either of the following two principles, namely;

(1) Cause and Effect – Cause is the process or operation or activity and effect is the incurrence of cost and

(2) Benefits received – overheads are to be apportioned to the various cost objects in proportion to the benefits received by them.

14. Service Department Expenses

a) Proper records shall be maintained in respect of Service Departments, i.e., cost centres which primarily provides auxiliary services across the enterprise, to indicate expenses incurred in respect of each such service cost centre like engineering, work shop, designing, laboratory, safety, transport, computer cell, welfare etc.

b) Each identifiable service cost centre shall be treated as a distinct cost object for measurement of the cost of services subject to the principle of materiality.

c) Cost of service cost centre shall be the aggregate of direct and indirect cost attributable to services being rendered by such cost centre.

d) Cost of in-house services shall include cost of materials, consumable stores, spares, manpower, equipment usage, utilities, and other resources used in such service.

e) Cost of other resources shall include related overheads.

f) Cost of services rendered by contractors within the facilities of the entity shall include charges payable to the contractor and cost of materials, consumable stores, spares, manpower, equipment usage, utilities, and other resources provided to the contractors for such services.

g) Cost of services rendered by contractors at their premises shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other than cash discount), taxes and duties refundable or to be credited. This cost shall also include the cost of resources provided to the contractors.

h) Cost of services for the purpose of inter unit transfers shall also include distribution costs incurred for such transfers.

i) Cost of services for the purpose of inter-company transfers shall also include distribution cost incurred for such transfers and administrative overheads.

j) Cost of services rendered to outside parties shall also include distribution cost incurred for such transfers, administrative overheads and marketing overheads.

k) Finance costs incurred in connection with the Service Cost Centre shall not form part of the cost of Service Cost Centre.

l) The cost of service cost centre shall not include imputed costs.

m) Where the cost of service cost centre is accounted at standard cost, the price and usage variances related to the services cost Centre shall be treated as part of cost of services. Usage variances due to abnormal reasons shall be treated as part of abnormal cost.

n) Any Subsidy or Grant or Incentive or any such payment received or receivable with respect to any service cost centre shall be reduced for ascertainment of the cost to which such amounts are related.

o) The cost of production and distribution of the service shall be determined based on the normal capacity or actual capacity utilization whichever is higher and unabsorbed cost, if any, shall be treated as abnormal cost. Cost of a Stand-by service shall include the committed costs of maintaining such a facility for the service.

p) Any abnormal cost where it is material and quantifiable shall not form part of the cost of the service cost centre.

q) Penalties, damages paid to statutory authorities or other third parties shall not form part of the cost of the service cost centre.

r) Credits or recoveries relating to the service cost centre including charges for services rendered to outside parties, material and quantifiable, shall be reduced from the total cost of that service cost centre.

s) Any change in the cost accounting principles applied for the measurement of the cost of Service Cost Centre shall be made, only if it is required by law or for compliance with the requirements of a cost accounting standard, or a change would result in a more appropriate preparation or presentation of cost statements of an enterprise.

t) While assigning cost of services, traceability to a cost object in an economically feasible manner shall be the guiding principle.

u) Where the cost of services rendered by a service cost centre is not directly traceable to a cost object, it shall be assigned on the most appropriate basis.

v) The most appropriate basis of distribution of cost of a service cost centre to the cost centres consuming services is to be derived from logical parameters which could be related to the usage of the service rendered. The parameter shall be equitable, reasonable and consistent.

15. Packing Expenses

a) Proper records shall be maintained separately for domestic and export packing showing the quantity and cost of various packing materials and other expenses incurred on primary and or or secondary packing indicating the basis of valuation.

b) The packing material receipts should be valued at purchase price including duties and taxes, freight inwards, insurance, and other expenditure directly attributable to procurement (net of trade discounts, rebates, taxes and duties refundable or to be credited) that can be quantified at the time of acquisition.

c) Finance costs directly incurred in connection with the acquisition of Packing Material shall not form part of Packing Material Cost.

d) Self-manufactured packing materials shall be valued including direct material cost, direct employee cost, direct expenses, job charges, factory overheads including share of administrative overheads comprising factory management and administration and share of research and development cost incurred for development and improvement of existing process or product.

e) Normal loss or spoilage of packing material prior to receipt in the factory shall be absorbed in the cost of balance materials net of amounts recoverable from suppliers, insurers, carriers or recoveries from disposal.

f) The forex component of imported packing material cost shall be converted at the rate on the date of the transaction. Any subsequent change in the exchange rate till payment or otherwise shall not form part of the packing material cost.

g) Any demurrage, detention charges or penalty levied by the transport agency or any authority shall not form part of the cost of packing materials.

h) Any Subsidy or Grant or Incentive or any such payment received or receivable with respect to packing material shall be reduced for ascertainment of the cost to which such amounts are related.

i) Issue of packing materials shall be valued using appropriate assumptions on cost flow, namely; First In First Out, Last In First Out, Weighted Average Rate. The method of valuation shall be followed on a consistent basis.

j) Wherever, packing material costs include transportation costs, determination of costs of transportation shall be governed by Cost Accounting Standard on determination of average (equalized) cost of transportation.

k) Packing Material Costs shall not include imputed costs.

l) Where packing materials are accounted at standard cost, the price variances related to such materials shall be treated as part of packing material cost and the portion of usage variances due to normal reasons shall be treated as part of packing material cost. Usage variances due to abnormal reasons shall be treated as part of abnormal cost.

m) The normal loss arising from the issue or consumption of packing materials shall be included in the packing materials cost.

n) Any abnormal cost where it is material and quantifiable shall be excluded from the packing material cost.

o) The credits or recoveries in the nature of normal scrap arising from packing materials if any, should be deducted from the total cost of packing materials to arrive at the net cost of packing materials.

p) Packing material costs shall be directly traced to a cost object to the extent it is economically feasible.

q) Where the packing material costs are not directly traceable to the cost object, these may be assigned on the basis of quantity consumed or similar measures like technical estimates.

r) The packing material cost of reusable packing shall be assigned to the cost object taking into account the number of times or the period over which it is expected to be reused.

s) Cost of primary packing materials shall form part of the cost of production. t) Cost of secondary packing materials shall form part of distribution overheads.

16. Interest & Financing Charges

a) Interest and Financing charges are costs incurred by an enterprise in connection with the borrowing of fund or other costs which in effect represent payment for the use of non- equity fund.

b) Interest and Financing Charges incurred shall be identified for: i) acquisition or construction or production of qualifying assets including fixed assets; and ii) Other finance costs for production of goods or operations or services rendered which cannot be classified as qualifying assets.

c) Interest and Financing Charges directly attributable to the acquisition or construction or production of a qualifying asset shall be included in the cost of the asset.

d) Interest and Financing Charges shall not include imputed costs.

e) Subsidy or Grant or Incentive or amount of similar nature received or receivable with respect to Interest and Financing Charges, if any, shall be reduced to ascertain the net interest and financing charges.

f) Penal Interest for delayed payment, Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the Interest and Financing Charges. In case the company delays the payment of Statutory dues beyond the stipulated date, interest paid for delayed payment shall not be treated as penal interest.

g) Interest paid for or received on investment shall not form part of the other financing charges for production of goods or operations or services rendered;

h) Assignment of Interest and Financing Charges to the cost objects shall be based on either of the following two principles, namely;

(1) Cause and Effect – Cause is the process or operation or activity and effect is the incurrence of cost and

(2) Benefits received – to be apportioned to the various cost objects in proportion to the benefits received by them.

17. Any other item of Cost. –

Proper records shall be maintained for any other item of cost being indispensable and considered necessary for inclusion in cost records for calculating cost of production of goods or rendering of services, cost of sales, margin in total and per unit of the goods or services under reference.

18. Capacity Determination

a) Capacity shall be determined in terms of units of production or equivalent machine or man hours.

b) Installed capacity is determined based on:

i) Manufacturers’ Technical specifications

ii) Capacities of individual or interrelated production centres.

iii) Operational constraints or capacity of critical machines or

iv) Number of shifts

c) In case manufacturers’ technical specifications are not available, the estimates by technical experts on capacity under ideal conditions shall be considered for determination of installed capacity. In case any production facility is added or discarded the installed capacity shall be reassessed from the date of such addition or discard. In case the same is reassessed as per direction of the Government, it shall be in accordance with the principles laid down in the said directives. In case of improvement in the production process, the installed capacity shall be reassessed from the date of such improvement.

d) Normal capacity shall be determined vis-a-vis installed capacity after carrying out following adjustments:

i) Holidays, normal shut down days and normal idle time,

ii) Normal time lost in batch change over,

iii) Time lost due to preventive maintenance and normal break downs of equipment, iv) Loss in efficiency due to ageing of the equipment, or v) Number of shifts.

e) Capacity utilization is actual production measured as a percentage of installed capacity.

19. Work-in-Progress and Finished Stock The method followed for determining the cost of work-in-progress and finished stock of the goods and for services under delivery or in

process shall be appropriate and shall be indicated in the cost records so as to reveal the cost element that have been taken into account in such computation. All conversion costs incurred in bringing the inventories to their present location and condition shall be taken into account while computing the cost of work-in-progress and finished stock. The method adopted for determining the cost of work-in progress and finished goods shall be followed consistently.

20. Captive Consumption

If the goods or services under reference are used for captive consumption, proper records shall be maintained showing the quantity and cost of each such goods or services transferred to other departments or cost centres or units of the company for self-consumption and sold to outside parties separately.

21. By-Products and Joint Products

a) Proper Records shall be maintained for each item of by-product, if any, produced showing the receipt, issues and balances, both in quantity and value. The basis adopted for valuation of by-product for giving credit to the respective process shall be equitable and consistent and should be indicated in cost records. Records showing the expenses incurred on further processing, if any, as well as actual sales realization of by-product shall be maintained. The proper records shall be maintained in respect of credits or recoveries from the disposal of byproducts.

b) Proper records shall be maintained the cost up to the point of separation of products or services shall be apportioned to joint products or services on reasonable and equitable basis and shall be applied consistently. The basis on which such joint costs are apportioned to different products or services arising from the process shall be indicated in the cost records. Proper records shall be maintained in respect credits or recoveries from the disposal of joint products or services.

22. Adjustment of Cost Variances

Where the company maintains cost records on any basis other than actual such as standard costing, the records shall indicate the procedure followed by the company in working out the cost of the goods or services under such system. The cost variances shall be shown against separate heads and analysed into material, labour, overheads and further segregated into quantity, price and efficiency variances. The method followed for adjusting the cost variances in determining the actual cost of the goods or services shall be indicated clearly in the cost records. The reasons for the variances shall be duly explained in the cost records and statements.

23. Reconciliation of Cost and Financial Accounts

The cost statements shall be reconciled with the financial statements for the financial year specifically indicating the expenses or incomes not considered in the cost records or statements so as to ensure accuracy and to adjust the profit of the goods or services under reference with the overall profit of the company. The variations, if any, shall be clearly indicated and explained.

24. Related Party Transactions

a) Related Party means related party as defined under sub-section 76 of section 2 of the Companies Act, 2013.

b) “Normal” Price means price charged for comparable and similar products in the ordinary course of trade and commerce where the price charged in the sole consideration of sale and such sale is not made to a related party. Normal price can be construed to be a price at which two unrelated and non-desperate parties would agree to a transaction and where such transaction is not clouded due to the proximity of the parties to the transaction and free from influence though the parties may have shared interest.

c) The basis adopted to determine Normal price should be classified as under:

i) Comparable uncontrolled price method

ii) Resale price method;

iii) Cost plus method;

iv) Profit split method;

v) Transactional net margin method;

vi) Any other method, to be specified.

d) In respect of related party transactions or supplies made or services rendered by a company to a company termed “related party relationship” and vice-a-versa, records shall be maintained showing contracts entered into, agreements or understanding reached in respect of –

(i) purchase and sale of raw materials, finished good(s), rendering of service(s), process materials and rejected goods including scraps, etc.;

(ii) utilisation of plant facilities and technical know-how;

(iii) supply of utilities and any other services;

(iv) administrative, technical, managerial or any other consultancy services;

(v) purchase and sale of capital goods including plant and machinery; and

(vi) any other payment related to the production of goods or rendering of services under reference.

e) These records shall also indicate the basis followed for arriving at the rates charged or paid for such goods or services so as to enable determination of the reasonableness of such rates in so far as they are in any way related to goods or services under reference.

25. Expenses or Incentives on Exports

a) Proper records showing the expenses incurred on the export sales, if any, of the goods or services under reference shall be separately maintained so that the cost of export sales can be determined correctly. Separate cost statements shall be prepared for goods or services exported giving details of export expenses incurred or incentive earned.

b) Proper records shall be maintained giving details of export commitments license-wise and the fulfilment of these commitments giving the reasons for non-compliance, if any. In case, duty free imports are made, the cost statements shall reflect this fact. If the duty free imports have been made after actual production, the statement shall reflect this fact also.

26. Production Records

Quantitative records of all finished goods (packed or unpacked) or services rendered showing production, issues for sales and balances of different type of the goods or services under reference, shall be maintained. The quantitative details of production of goods or services rendered shall be maintained separately for selfproduced, third party on job work, loan license basis etc.

27. Sales Records

Separate details of sales shall be maintained for domestic sales at control price, domestic sales at market price, export sales under advance license, export sales under other obligations, export sales at market price, and sales to related party or inter unit transfer. In case of services, details of domestic delivery or sales at control price, domestic delivery or sales at market price, export delivery or sales under advance license, export delivery or sales under other obligations, export delivery or sales under market price, and delivery or sales to related party or inter unit transfer. Such details shall be maintained separately for each plant or unit wise or service centre wise for total as well as per unit sales realization.

28. Cost Statements

 Cost statements (monthly, quarterly and annually) showing quantitative information in respect of each goods or service under reference shall be prepared showing details of available capacity, actual production, production as per excise records, production as per GST records, capacity utilisation (inhouse), stock purchased for trading, stock and other adjustments, quantity available for sale, wastage and actual sale, total quantity of outward supplies as per cost records and total outward supplies as per GST records during current financial year and previous year.

a) Cost statements (monthly, quarterly and annually) showing quantitative information in respect of each good or service under reference shall be prepared showing details of available capacity, actual production, production as per excise records, capacity utilization (in-house), stock purchased for trading, stock and other adjustments, quantity available for sale, wastage and actual sale during current financial year and previous year.

b) Such statements shall also include details in respect of all major items of costs constituting cost of production of goods and services, cost of sales of goods or services and margin in total as well as per unit of the goods and services. The goods or services emerging from a process, which forms raw material or an input material or service for a subsequent process, shall be valued at the cost of production or cost of service up to the previous stage.

 Cost statements (monthly, quarterly and annually) in respect of reconciliation of indirect taxes showing details of total clearances of goods or services, assessable value/ taxable value, duties or taxes paid, CENVAT or VAT or Service Tax or GST Credit utilised, duties or taxes recovered and interest or penalty paid.

c) Cost statements (monthly, quarterly and annually) in respect of reconciliation of indirect taxes showing details of total clearances of goods or services, assessable value, duties or taxes paid, CENVAT or VAT or Service Tax credit utilized, duties or taxes recovered and interest or penalty paid.

d) If the company is operating more than one plant, factory or service centre, separate cost statements as specified above shall be prepared in respect of each plant. Factory or service centre.

e) Any other statement or information considered necessary for suitable presentation of costs and profitability of goods or services produced by the company shall also be prepared.

29. Statistical Records

a) The records regarding available machine hours or direct labour hours in different production departments and actually utilized shall be maintained for production of goods or rendering of services under reference and shortfall suitably analysed. Suitable records for computation of idle time of machines or labor shall also be maintained and analysed.

b) Proper records shall be maintained to enable company to identify the capital employed, net fixed assets and working capital separately for the production of goods or rendering of services under reference and other goods or services to the extent such elements are separately identifiable. Non-identifiable items shall be allocated on a suitable and reasonable basis to different goods or services. Fresh investments on fixed assets for production of goods or rendering of services under reference that have not contributed to the production of goods or rendering of services during the relevant period or year shall be indicated in cost records. The records shall, in addition, show assets added as replacement and those added for increasing existing capacity.

30. Records of Physical Verification

Records for physical verification may be maintained in respect of all items held in the stock such as raw material, process materials, packing materials, consumables, stores, machinery spares, chemicals, fuels, finished goods and fixed assets etc. Reasons for shortages or surplus arising out of such verifications and the method followed for adjusting the same in the cost of the goods or services shall be indicated in the records.

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

 

Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018. To view the Notification. Click Here.
Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018. To view the Notification. Click Here.
Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018. To view the Notification. Click Here.
Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018. To view the Notification. Click Here.
Omitted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018. To view the Notification. Click Here.
Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018. To view the Notification. Click Here.
Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018. To view the Notification. Click Here.
Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018. To view the Notification. Click Here.
Inserted vide Companies (Cost Records and Audit) Amendment Rules, 2018 dated 03.12.2018. To view the notification, Click Here

Form CRA 3 (Substituted vide Companies (cost records and audit) Amendment Rules, 2017) [Effective from 1 Apr.2016]

 

Form CRA-3

[See rule 6(4) of the Companies (Cost Records and Audit) Rules, 2014]

FORM OF THE COST AUDIT REPORT

I/We,…………………. having been appointed as Cost Auditor(s) under sub-section (3) of section 148 of the Companies Act, 2013 (18 of 2013) of …………………….(mention name of the company) having its registered office at ………………….. (mention registered office address of the company) (hereinafter referred to as the company), have audited the Cost Records maintained under section 148 of the said Act, in compliance with the coslt auditing standards, in respect of the……[mention name (s) of Product(s) / service(s)] for the period/year………… (mention the financial year) maintained by the company and report, in addition to my/our observations and suggestions in paragraph 2.

(i) I/We have/have not obtained all the information and explanations, which to the best of my/our knowledge and belief were necessary for the purpose of this audit.

(ii) In my/our opinion, proper cost records, as per rule 5 of the Companies (Cost Records and Audit)Rules, 2014 have/have not been maintained by the company in respect of prodtct(s)/service(s)under reference.

(iii) In my/our opinion, proper retums adequate for the purpose of the Cost Audit have/have not been received from the branches not visited by me/us.

(iv) In my/our opinion and to the best of my/our information, the said books and records give/do not give the information required by the Companies Act, 2013, in the manner so required.

(v) In my/our opinion, the company has/does not have adequate system of internal audit of cost records which to my/our opinion is commensurate to its nature and size of its business.

(vi) In my/our opinion, information, statements in the annexure to this cost audit report give /does not give a true and fair view of the cost of production of product(s)/rendering of service(s), cost of sales, margin and other information relating to product(s)/service(s) under reference.

(vii) Detailed unit-wise and product/service-wise cost statements and schedules thereto in respect of the product/service under reference of the company duly audited and certified by me/us are/are not kept in the company.

2. Observations and suggestions, if any, of the Cost Auditor, relevant to the cost audit.

Dated: this __________ day of 20___at _________ (mention name of place of signing lhis report)

SIGNATURE ANO SEAL OF THE COST AUDITOR (S

)MEMBERSHIP NUMBER (S)

NOTES:

(1) Delete words not applicable.

(2) If as a result of the examination of the books of account, the Cost Auditor desires to point out any material deficiency or give a qualified report, he or she shall indicate the same against the relevant para(i) to (vi) in the prescribed form of the Cost Audit Report giving details of discrepancies he/she has come across.

(3) The report, suggestions, observations and conclusions given by the Cost Auditor under this paragraph shall be based on verified data, reference to which shall be made here and shall, wherever practicable, be included after the company has been afforded an opportunity to comment on them.

Annexure to the Cost Audit Report

Part-A

1. General Information

1Corporate identity number or foreign company registration number
2Name of company
3Address of registered office or of principal place of business in India of company
4Address of corporate office of company
5Email address of company
6Date of beginning of reporting Financial yeardd/mm/yyyy
7Date of end of reporting Financial yeardd/mm/yyyy
8Date of beginning of previous financial yeardd/mm/yyyy
9Date of end of previous financial yeardd/mm/yyyy
10Level of rounding used in cost statements (in INR)Absolute/thousands/lacs/crores
11Whether Indian Accounting Standards are applicable to the companyYes/No
12Number of cost auditors for reporting period
13Date of board of directors meeting in which annexure to cost audit report was approved
14Whether cost auditors report has been qualified or has any reservations or contains adverse remarks
15Consolidated qualifications, reservations or adverse remarks of all cost auditors
16Consolidated observations or suggestions of all cost auditors
17Whether company has related party transactions for sale or purchase of goods or services

2. General Details of the Cost Auditor

1Whether cost auditor is lead auditor
2Category of cost auditor
3Firm's registration number
4Name of cost auditor/cost auditor's firm
5PAN of cost auditor/cost auditor's firm
6Address of cost auditor or cost auditor's firm
7Email id of cost auditor or cost auditor's firm
8Membership number of member signing report
9Name of member signing report
10Name(s) of product(s) or service(s) with CETA Headings
11 SRN number of Form CRA-2 (substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018) SRN number of Form 23C / CRA-2
12 (a) Number of audit committee meeting(s) during the year for which Cost Auditor was invited.
(b) Number of audit committee meeting(s) attended by Cost Auditor during the year.(substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)
Number of audit committee meeting attended by cost auditor during year
13Date of signing cost audit report and annexure by cost auditor
14Place of signing cost audit report and annexure by cost auditor

3. Cost Accounting Policy

(1) Briefly describe the cost accounting policy adopted by the company and its adequacy or otherwise to determine correctly the cost of production/operation, cost of sales, sales realisations and margin of the product(s)/service(s) under reference separately for each product(s)/service(s). The policy should cover, inter alia, the following areas:

a) Identification of cost centers/cost objects and cost drivers.

b) Accounting for material cost including packing materials, stores and spares, employee cost, utilities and other relevant cost components.

c) Accounting, allocation and absorption of overheads

d) Accounting for Depreciation/Amortisation

e) Accounting for by-products/joint-products or services, scarps, wastage etc.

f) Basis for Inventory Valuation

g) Methodology for valuation of Inter-Unit/Inter Company and Related party transactions.

h) Treatment of abnormal and non-recurring costs including classification of other non-cost items.

i) Other relevant cost accounting policy adopted by the Company

(2) Briefly specify the changes, if any, made in the cost accounting policy for the product(s)/service(s)under audit during the current financial year as compared to the previous financial year.

(3) observations of the cost Auditor regarding adequacy or otherwise of the Budgetary control System, if any, followed by the company.

4. PRODUCT/SERVICE DETAIL (for the company as a whole)

Name of Product(s) /Service(s)UOMCETA Heading (Wherever applicable)Whether covered under Cost Audit Yes/ NoNet Operational Revenue (net of taxes, duties etc.)
Current Year Rs.Previous Year Rs.
1.
2.
3.
4.
Total Net Operational Revenue of Manufactured Product or Service (Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)Total Net revenue from Operations
Other Operating Incomes of company (Inserted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)
Total Operating Incomes of Company (Inserted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)
Other Incomes of Company
Total revenue as per Financial Accounts
(i) Exceptional and Extra Ordinary income
(ii) Other Comprehensive Income
, if any. (Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)
Exceptional, Extra Ordinary and Other Comprehensive Income, if any
Total Revenue including Exceptional, Extra Ordinary and Other Comprehensive Income, if any
Turnover as per Excise/Service Tax Records
Note:
1) Explain the difference, if any, between Tumover as per Financial Statements and Turnover as per Excise/service Tax Records

PART.B

FOR MANUFACTURING SECTOR

1. QUANTITATIVE INFORMATION (for each product with CETA Heading separately)
Name of Product
CETA Heading
ParticularsUnitCurrent YearPrevious Year
1. Available Capacity
(a) Installed Capacity
(b) Capacity enhanced during the year, if any
(c) Capacity available through leasing arrangements, if any
(d) Capacity available through loan license / third parties
(e) Total available Capacity
2. Actual Production
(a) Self manufactured
(b) Produced under leasing arrangements
(c) Produced on loan license / by third parties on job work
(d) Total Production
3. Production as per Excise/GST (Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018) Excise Records
4. Capacity Utilisation (in-house)
5. Finished Goods Purchased
(a) Domestic Purchase of Finished Goods
(b) Imports of Finished Goods
(c) Total Finished Goods Purchased
6. Stock and Other Adjustments
(a) Change in Stock of Finished Goods
(b) Self / Captive Consumption (incl. samples etc.)
(c) Other Quantitative Adjustments, if any (wastage etc.)
(d) Total Adjustments
7. Total Available Quantity for Sale [2(d) + 5(c] + 6(d)
8. Actual Sales
(a) Domestic Sales of Product
(b) Domestic Sales of Traded Product
(c) Export Sale of Product
(d) Export Sale of Traded Product
(e) Total Quantity Sold

2. ABRIDGED COST STATEMENT (for each product with CETA Heading separately)
Name of Product
CETA Heading
Unit of Measure
ProductionFinished Goods PurchasedFinished Stock AdjustmentCaptive ConsumptionOther AdjustmentsQuantity Sold
Current Year
Previous Year
Sno.ParticularsCurrent YearPrevious Year
1Materials Consumed (specify details as per Para 2A)Amount (Rs.)Rate per Unit (Rs.)Amount (Rs.)Rate per Unit (Rs.)
2Process Materials/Chemicals
3Utilities (specify details as per 2B)
4Direct Employees Cost
5Direct Expenses
6Consumable Stores and Spares
7Repairs and Maintenance
8Quality Control Expenses
9Research and Development Expenses
10Technical know-how Fee / Royalty
11Depreciation/Amortisation
12Other Production Overheads
13Industry Specific Operating Expenses (specify details as per Para 2 C)
14Total (1 to 13)
15Increase/Decrease in Work-in-Progress
16Less: Credits for Recoveries, if any
17Primary Packing Cost
18Cost of Production/Operations (14 + '15 to 17)
19Cost of Finished Goods Purchased
20Total Cost of Production and Purchases ( 18 + 19)
21Increase/Decrease in Stock of Finished Goods
22Less: Self/Captive Consumption (incl. Samples, etc.)
23Other Adjustments (if any)
24Cost of Production/Operation of Product Sold (20 + 21 to 23)
25Administrative Overheads
26Secondary Packing Cost
27Selling and Distribution Overheads
28Cost of Sales before Finance Charges (Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018) Interest (24 to 27)
29Finance Cost
30Cost of Sales (28 + 29)
31Net Sales Realisation (Net of Taxes and Outies)
32Margin [Profit(Loss) as per Cost Accounts] (31 - 30)
NOTES:
1. Separate cost statement shall be prepared for each CETA Heading representing the product
2.In case the same product has different unit of measure, separate cost statement shall be provided for different unit of measures.
3.The items of cost shown in the Proforma are indicative and the same shall be reflected keeping in mind the materiality of the item of cost in the product. The Proforma may be suitably modified to meet the requirement of the industry/product.
4. In case the company follows a pre-determined or standard costing system, the above cost statement shall reflect figures at actuals after adjustment of variances, if any.

2A. Details of Materials Consumed
Name of Product
CETA Heading
Description of MaterialCategoryUOMCurrent YearPrevious Year
1.QuantityRate per Unit (Rs.)Amount (Rs.)QuantityRate per Unit (Rs.)Amount (Rs.)
2.
3.
4.
5.
6.
7.
8.
9.
10.
Category: Indigenous/ lmported/ Self Manufactured

2B. Details of Utilities Consumed
Name of Product
CETA Heading
Description of Utilities Consumed (Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018) Material UOMCurrent YearPrevious Year
QuantityRate per Unit (Rs.)AmountQuantityRate per Unit (Rs.)Amount
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

2C. Details of Industry Specific Operating Expenses
Name of Product
CETA Heading
Description of Industry Specific Operating ExpensesCurrent YearPrevious Year
AmountAmount
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

PART-C

FOR SERVICE SECTOR

1. QUANTITATIVE INFORMATION (for each service separately)
Name of Service
Service Code (if applicable)
ParticularsUnit of MeasurementCurrent YearPrevious Year
1. Available Capacity
(a) Installed Capacity
(b) Capacity enhanced during the year, if any
(c) Total available Capacity
2. Actual Services Provided
(a) Own Services
(b) Services under contractual arrangements
(c) Outsourced Services
(d) Total Services
3. Total Services provided as per Service Tax/GST(Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018) Service Tax Records
4. Capacity Utilisation (in-house)
5. Other Adjustments
(a) Self or Captive Consumption
(b) Other Quantitative Adjustments, if any
(c) Total Other Adjustments (Inserted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)
6.Total Available Services for Sale (2(d)+5(c)] (Inserted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)
7. (Renumbered vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018.) 5. Actual Sales
(a) Services rendered - Domestic
(b) Services rendered - Export
(c) Total Services Rendered

2. ABRIDGED COST STATEMENT (for each service separately)
Name of Service
Service Code (if applicable)
Unit of Measure
Service ProvidedCaptive ConsumptionOther AdjustmentsServices Rendered
Current Year
Previous Year
Sno.ParticularsCurrent YearPrevious Year
Amount (Rs.)Rate per Unit (Rs.)Amount (Rs.)Rate per Unit (Rs.)
1Materials Consumed (specify details as per Para 2A)
2Utilities (specify details as per Para 2B)
3Direct Employees Cost
4Direct Expenses
5Consumable Stores and Spares
6Repairs and Maintenance
7Quality Control Expenses
8Research and Development Expenses
9Technical know-how Fee / Royalty
10Depreciation/Amortisation
11Other Overheads
12Industry Specific Operating Expenses (specify details as per Para 2C)
13Total (1 to 12)
14Less: Credits for Recoveries, if any
15Cost of Services provided (13 - 14)
16Cost of Outsourced/Contractual Services
17Total Services available
18Less: Self/Captive Consumption
19Other Adjustments (if any)
20Cost of Services Sold (17 - 18 + 19)
21Administrative Overheads
22Selling and Distribution Overheads
23Cost of Sales before Finance Charges (Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018) Interest (20+21+22)Finance Cost
24Finance Cost
25Cost of Sales (23 + 24)
26Net Sales Realisation (Net of Taxes and Duties
27Margin [Profit(Loss) as per Cost Accounts] (26 - 25)
NOTES:
1Separate cost statement shall be prepared for each service.
2The items of cost shown in the proforma are indicative and the same should be reflected keeping in mind the materiality of the item of cost in the service
3The proforma may be suitably modified to meet the requirement of the industry/service
4In case the company follows a pre-determined or standard costing system, the above cost stalement should reflect figures at actuals after adjustment of variances, if any.

2A. Details of Materials Consumed
Name of Service
Service Code (if applicable)
Description of MaterialCategoryUOMCurrent YearPrevious Year
QuantityRate per Unit (Rs.)AmountQuantityRate per Unit (Rs.)Amount
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Category: Indigenous/ Imported/ Self Manufactured

2B. Details of Utilities Consumed
Name of Service
Service code (if applicable)
Description of Utilities Consumed (Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018) Material UOMCurrent YearPrevious Year
QuantityRate per Unit (Rs.)AmountQuantityRate per Unit (Rs.)Amount
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

2C. Details of Industry Specific Operating Expenses
Name of Service
Service Code (if applicable)
Description of Industry Specific Operating ExpensesCurrent YearPrevious Year
AmountAmount
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

PART D

1.PRODUCT AND SERVICE PROFITABILITY STATEMENT (for audited products/services)

Sno.ParticularsCurrent YearPrevious Year
Sales
Rs.
Cost of Sales
Rs.
Margin
Rs.
Sales
Rs.
Cost of Sales
Rs.
Margin
Rs.
Product 1
Product 2
Product 3
.....etc.
Service 1
Service 2
Service 3
.... etc.
Total

2. PROFIT RECONCILIATION (for the company as a whole)
Sno.ParticularsCurrent Year
Rs.
Previous Year
Rs.
1.Profit or Loss as per Cost Accounts (Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018 ) Accounting Records
(a) For the audited product(s)/service(s)
(b) For the un-audited product(s)/service(s)
2.Add: Incomes not considered in cost accounts (specify details)
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
3.Less: Expenses not considered in cost accounts (specify details)
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
4.Difference in Valuation of stock between financial accounts and cost accounts
5.Other adjustments, if any
6.Protit or Loss as per Financial Accounts (excluding Other Comprehensive Income for companies following Ind AS)
Note: Show abnormal wastages, expenses on strikes/lock-outs and any other items of expenses or incomes of abnormal nature etc. not considered in cost separately

3. VALUE ADDITION AND DISTRIBUTION OF EARNINGS (for the company as a whole)

Sno.ParticularsCurrent Year
Rs.
Previous Year
Rs.
Value Addition:
1 Revenue from Operations ( Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)
Gross Sales (excluding sales returns)
2 Less: Taxes and other duties ( Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)
Less: Excise duty, etc
3 Net Revenue from Operations ( Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)
Net Sales
4Add: Export Incentives
5 Add/Less: Adjustment in Stocks ( Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)
Add/Less: Adjustment in Finished Stocks
6Less: Cost of bought out inputs
(a) Cost of Materials Consumed
(b)Process Materials / Chemicals
(c) Consumption of Stores and Spares
(d) Utilities (e.g. power and fuel)
(e)Others, if any
Total Cost of bought out inputs
7Value Added
8Add: Income from any other sources
9 Add: (i) Exceptional and Extra Ordinary Income
(ii) Other Comprehensive Income, if any ( Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)

Add: Exceptional, Extra Ordinary and Other Comprehensive Income, if any
10Earnings available for distribution
Distribution of Earnings to:
1Employees as salaries and wages, retirement benefits.etc.
2Shareholders as dividend
3Company as retained funds
4Government as taxes (specify)
5Exceptional and Extra Ordinary Expenses, if any
6Others, if any (specify)
7Total distribution of earnings

4. FINANCIAL POSITION AND RATIO ANALYSIS (for the company as a whole)

Sno.ParticularsUnitsCurrent YearPrevious Year
A.
1
2
3
4

5

6
7
Financial Position
Share Capital (see Note '1)
Reserves and Surplus (see Note 1)
Long Term Borrowings (see Note 'l)
(a) Gross Fixed Assets
(b) Net Fixed Assets (see Note 1)
(a) Current Assets
b) Less: Cunent Liabilities
Capital Employed (see Note 2)
Net Worth (see Note 3)
B.
1
2
3
Financial Performance
Value Added
Net Revenue from Operations of Company
Profit before Tax (PBT)
C.
1
2
3
4
Profitability Ratios
PBT to Capital Employed (B3/A6)
PBT to Net Worth (B3/A7)
PBT to Value Added (B3/B1)
PBT to Net revenue from Operations (B3/B2)
%
%
%
%
D.
1
2
3
Other Financial Ratios
Debt-Equity Ratio
Current Assets to Current Liabilities
Valued Added to Net Revenue from Operations



%
E.
1
2
3
Working Capital Ratios
Raw Materials Stock to Consumption
Stores and Spares to Consumption
Finished Goods Stock to Cost of Sales (Omitted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)
Months
Months
Months
Notes:
1) In this table, in case of companies to which Indian Accounting Standards apply:
a) Share Capital shall mean 'Equity Share Capital'
b) Reserves and Surplus shall mean 'Other Equity.'
c) Long Term Borrowings shall mean'Borrowing under Non-Current Liabilities'
d) Net Fixed Assets shall mean the sum total of 'Property, Plant and Equipment', 'Capital Work in Progress', 'Goodwill', 'Other intangible assets', 'Intangible assets under development' and'Biological assets other than bearer Plants.
2) Capital Employed means average of Net fixed assets (excluding effect of revaluation) plus Non-current investments and net current assets existing at the beginning and close of the financial year.
3) Net Worth is as defined under clause (57) of section 2 of the Companies Act, 2013

5. RELATED PARTY TRANSACTIONS (for the company as a whole)

Sno. Name and CIN of the Related Party (Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)
Name and Address of the Related Party
Name of the Product/ServiceNature of Transaction (Sale,Purchase etc.)QuantityTransfer PriceAmountNormal PriceBasis adopted to determine the Normal Price
1
2
3
4
5
6
7
8
9
10

NOTES:

1) Details should be furnished for each Related Party and Product /Service separately.

2) Details of Related Party transactions without indicating the Normal Price and the basis thereof shall be considered as incomplete information.

6. Reconciliation of Indirect Taxes (for the Company as a whole) (Substituted vide the Companies (cost records and audit) Amendment Rules, 2019 dated 15.10.2019 w.e.f., 01.04.2018)

ParticularsTaxable Value/
Assessable Value
Excise Duty/ VAT, CST, Cess etc./ Other State Taxes, if anyGoods & Services Tax
CGSTSGST /
UTGST
IGSTCess and
Others
Rs.Rs.Rs.Rs.Rs.Rs.
Sl. No.Duties/ Taxes Payable
Excise Duty
1Domestic
2Export
3Stock Transfers (Net)
4Others, if any
5Total Excise Duty (1 to 4)
6VAT, CST, Cess etc.
7Other State Taxes, if any
Goods & Services Tax
8Outward Taxable Supplies (other than zero rated, Nil Rated and Exempted)
9Outward Taxable Supplies (zero rated)
10Inward Supplies (liable to Reverse Charge)
11Other Outward Supplies (Nil Rated, Exempted)
12Non-GST Outward Supplies
13Total (8 to 12)
14Total Duties / Taxes Payable (5 + 6 + 7 + 13)
Duties/ Taxes paid [by Utilisation of Input Tax Credit and Payment through Cash Ledger, as the case may be]
Input Tax Credit Utilised
15CGST/ CENVAT
16SGST / UTGST/ VAT
17IGST
18Cess
19Transitional Credit
20Others, if any, specify
21Total Input Tax Credit Utilised (15 to 20)
22Payment through Cash Ledger
23Total Duties/Taxes Paid (21 + 22)
Difference between Taxes Paid and
Payable (14 - 23)
24Interest/Penalty/Fines Paid

Particulars Assessable Value
Rs.
Excise Duty
Rs.
Service Tax
Rs.
Cess and Others
Rs.
VAT
Rs.
Duties/Taxes Payable
Excise Duty
1 Domestic
2 Export
3 Stock Transfers (Net)
4 Duty Free Clearance, Others etc
5 Total Excise Duty (1 to 4)
6 Service Tax
7 VAT, CST etc
8 Other State Taxes, if any
9 Total Duties / Taxes Payable (5 to 8)
Duties/Taxes Paid
10 Cenvat/VAT Credit Utilised - Inputs
11 Cenvat/VAT Credit Utilised - Capital Goods
12 Cenvat/VAT Credit Utilised - Input Services
13 Cenvat/VAT Credit Utilised - Others
14 Total (10 to 13)
15 Paid through PLA/Cash
16 Total Duties/Taxes Paid (14 + 15)
17 Duties/Taxes Recovered
18 Difference between Duties/Taxes Paid and Recovered
19 Interest/Penalty/Fines Paid
Note: Provide separate amounts in notes in respect of Item 4 above.

SIGNATURE NAME                        SIGNATURE NAME                                                SIGNATURE NAME

  COST AUDITOR                          COMPANY SECRETARY/DIRECTOR                              DIRECTOR

MEMBERSHIP NUMBER         MEMBERSHIP/DIN NUMBER                                        DIN NUMBER
     SEAL                                                 STAMP                                                                            STAMP
     DATE                                                 DATE                                                                               DATE
Notes:
(1) Wherever, there is any significant variation in the current year’s figure over the previous year’s figure for any item shown under each para of the Annexure to the Cost Audit Report, reasons thereof shall be given by the Cost Auditor.
(2)Wherever, duration of the current year or the previous year is not twelve months, same shall be clearly indicated in the resort.


CAIRR PLUS on Google Playsecretarial automation?Subscribe for Updates