Applicability of cost audit to Pvt Ltd co.

[satbir singhwahi]

A pvt ltd company having Turnover of 202.75 Cr in FY 2025-26, dealing in manufacture of Knittted cloth, Dyeing and Garments. Whether Cost Audit applicable

[YAGAY and SUN]

Based on the information provided, company is a Pvt Ltd Co. engaged in the manufacture of knitted cloth, dyeing & garments, with an aggregate turnover of Rs. 202.75 Crore during FY 2025-26.

The applicability of Cost Audit is governed by Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014, as amended from time to time.

The products manufactured by the company fall under the Textiles Industry, which is covered under the industries specified in Rule 3 of the above Rules, 2014. So company is required to maintain cost records if the set turnover criteria are satisfied.

For companies operating in the Non-Regulated Sector, Cost Audit becomes applicable where, during the nearly preceding FY:

• overall annual turnover from all products and services is Rs. 100 Crore or more;
• aggregate turnover from the individual product(s) or service(s) covered under Rule 3 is Rs. 35 Crore or more.

In the present case, the company's turnover for FY 2025-26 is Rs. 202.75 Crore, which exceeds the prescribed threshold of Rs. 100 Crore. Further, considering that company's principal business activities comprise manufacture of knitted cloth, dyeing & garments, it is reasonable to infer that turnover from the specified products exceeds the threshold limit of Rs. 35 Crore.

So, subject to verification of the product-wise turnover & applicability of any statutory exemption, company falls within the ambit of Cost Audit under Rule 4. So, company shall be required to appoint a Cost Auditor for conducting Cost Audit for the financial year 2026-27, since the applicability is gritty based on the turnover criteria of the nearly preceding FY 2025-26.

[YAGAY and SUN]

However, before concluding applicability, it is necessary to examine whether the company is eligible for any exemption available under the Rules, including but not limited to:

• Revenue from exports in foreign exchange exceeding 75% of total revenue;
• Qualification as a Micro or Small Enterprise under the applicable MSME criteria;
• Operations carried out from a unit located in a SEZ

In absence of above exemptions & subject to fulfilment of the set turnover criteria, Cost Audit shall be applicable, and the company would be required to comply with all consequential provisions relating to appointment of Cost Auditor, filing of Form CRA-2, maintenance of cost records, conduct of Cost Audit & filing of Cost Audit Report in prescribed manner under Companies Act, 2013 & Audit Rules, 2014.

AI Summary

Cost audit applicability turns on turnover thresholds, product-wise turnover, and available exemptions for textile manufacturing companies.
Applicability of cost audit to a private limited company engaged in textile-related manufacture depends on the turnover thresholds under section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014. In the non-regulated sector, cost audit becomes relevant where the preceding financial year's overall turnover is Rs. 100 crore or more and the turnover from the products or services covered by Rule 3 is Rs. 35 crore or more. The company must also verify whether any exemption applies, including export revenue above 75%, Micro or Small Enterprise status, or SEZ operations.