TaxTMI 
TaxTMI 
Companies (cost records and audit) Rules,2014
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....y be called the Companies (cost records and audit) Rules, 2014. (2) They shall come into force on the date of publication in the Official Gazette. 2. Definitions: In these rules, unless the context otherwise requires - (a) "Act" means the Companies Act, 2013 (18 of 2013); (b) "Cost Accountant in practice" means a cost accountant as defined in clause (b) of subsection (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; (d) "cost audit report" means the report duly audited and signed by the cost auditor including attachment, annexure, qualifications or observations etc. to cost audit 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....
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....of the Major Port Trusts Act, 1963(38 of 1963); (ii) Aeronautical services of air traffic management, aircraft operations, ground safety services, ground handling, cargo facilities and supplying fuel rendered by airports and regulated by the Airports Economic Regulatory Authority under the Airports Economic Regulatory Authority of India Act, 2008 (27 of 2008); (iii) Telecommunication services made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature (other than broadcasting services) and regulated by the Telecom Regulatory Authority of India under the Telecom Regulatory Authority of India Act, 1997 (24 of 1997); (iv) Generation, transmission, distribution and supply of electricity regulated by the relevant regulatory body or authority under the Electricity Act, 2003 (36 of 2003), other than for captive generation (as defined under the Electricity Rules 2005); (v) Steel; (vi) Roads and other infrastructure projects; (vii) Drugs and Pharmaceuticals; (viii) Fertilisers; (ix) Sugar and industrial alcohol; (x) Petroleum prod....
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....; (ii) in the case of a company producing any one specific product or service, if the net worth of the company is rupees one hundred and fifty crore or more or the turnover is rupees twenty five crore or more. (D) Companies (including foreign companies other than those having only liaison offices) engaged in the production, import and supply or trading of following medical devices, namely:- (a) (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; (xiv)Pacemaker (temporary and permanent); (xv) patent ductus arteriosus, atrial septal defect and ventricular septal defect closure device; (xvi) Cardiac Re-synchronize Therapy ; (xvii) Urethra Spinicture Devices; (xviii) Sling male or female; (xix) Prostate occlusion....
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....e rules including all units and branches thereof, shall, in respect of each of its financial year commencing on or after the 1^st day of April, 2014, maintain cost records in form CRA-1. (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. 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. (2) Every company referred to in sub-rule (1) shall inform the cost auditor concerned of his or its appointment as such ....
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....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....
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....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....
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...., 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 labo....
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....rect 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, producti....
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....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 depreci....
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....es 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 o....
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....ION: 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.....
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....ntained 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 non-compliance, 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....
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....ds, 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 presenta....
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....hall 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. FORM CRA-2 This e-form h....
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....a foreign company) *Designation *Director identification number of the director or Managing Director or manager or authorised representative; 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 ...(mention name (mention registered 148(3) of the Companies Act, 2013(18 of 2013) of. of the company) having its registered office at 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 good(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. Page 23 of 54 (i) (ii) (iii) (iv) (v) (vi) 2 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....
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.... date of Filing of Form of intimation of appointment of cost auditor with the Central Government: 9. Date of first commencement of commercial production/delivery of service of good(s)/service(s) under reference. 10. Date of Board of Directors' meeting wherein the Annexure to the cost audit report was approved: 11. No. of Audit Committee meetings held by the company, and attended by the Cost Auditor during the year. 12 If there is any foreign technical collaboration for the good(s)/service(s) under reference, the following details shall be given: (a) name and address of the foreign collaborators; (b) main terms of agreement; (c) amount of royalty, lump sum payment, technical aid fee payable and the basis of calculating the same; (d) whether the technical collaborator has contributed to the share capital. If so, the paid up share capital so held. 2. 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 realization and margin of the good(s)/service(s) under reference separately for each good(s)/servi....
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....city 2. Actual Production/Services rendered (a) Self Manufactured/rendered (b) Produced under leasing arrangements/outsourced (c) Produced on loan license/by third parties on job work/outsourcing agency (d) Total Production/Services rendered 3. Production/services rendered as per excise records/service tax records 4. Capacity utilization (in-house) 5. Stock purchased for trading/Services hired (a) Domestic purchase/hiring of services (b) Imports (c) Total Purchases/Services hired 6. Stock and other adjustments (a) Change in stock of Finished Goods/Value of outgoing services (b) Self/Captive Consumption/internal services (incl. samples etc.) (c) Other quantitative adjustments, if any (wastage etc.) (d) Total adjustments 7. Total Available Quantity/Service rendered [2(d)+5(c) - 6(d)] 8. Actual Sales (a) Domestic Sales (Goods/Services) (b) Domestic Sales (Trading) (c) Export Sale (Goods/Services) (d) Export Sale (Trading) 28 (e) Total Quantity Sold/Services rendered Notes: 1. It should be mentioned whether the installed capacity is on single shift or multiple shift basis. 2. In ord....
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....re than one good(s)/service(s) additional columns may be added. Basis of apportionment of the good(s)/service(s) under reference A. Quantitative Details: 1. Direct Workers: a. Average number during the year b. Man days available Mandays actually worked for: (i) own production/provision of services (ii) job work/services outsourced d. Reason-wise analysis of idle man-days (a-b) 1) Absenteeism II) Shortage of raw materials/inp ut services III) Power shortage/failu res IV) Others (specify) 2. Indirect Workers: Current Year Previous Year Quan tity Rate Amoun Quan Rate Amoun t tity t Quant ity Rate Amou nt 32 a. Average number during the year b. Man days available Mandays actually worked for: (i) own production/provision of services (ii) job work/services outsourced d. Reason-wise analysis of idle man-days (a-b) 1) Absenteeism 11) Shortage of raw materials/inp ut services III) Power shortage/failu res IV) Others (specify) B. Cost Detail: 1. Direct labour cost ....
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....vice(s) additional columns may be added. under reference Current Year Previous Year Quan Rate Amoun Quan Rate Amoun Quant Rate tity t tity t ity Amou nt Note: The break-up under each head should be furnished in respect of major items constituting at-least 90% of the overhead cost under each head. 13. RESEARCH AND DEVELOPMENT EXPENSES 36 Particulars 1. Process development and improvement 2. Existing product/service /service development 3. New product/service /service development 4. Others, if any 5. Total amount 6. Amount capitalized/ deferred during the year 7. Net amount (5-6) 8. Deferred amount of earlier years, if any 9. Total amount provided in the cost records (7+8 10. Amount paid to related parties of the Basis of apportionment Current Year(For Share the Company as a whole) Goods/Services covered 14. ROYALTY AND TECHNICAL KNOW HOW CHARGES: Particulars 1. Royalty on production/Sales/provision of services A B C..etc. For Company as a whole Share of the Basis of apportionment Goods....
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....work-in-progress to be shown separately. 19. Sales/Revenue of the good(s)/service(s) covered: Particulars Current Year Quantity Rate Amount (Rs.) Quantity Rate 1. Purchased Goods/Outsour ced services :(specify) (a) (b) 2. Loan License (a) (b) 3. Basis: (specify) Own Manufactured/ self-rendered: specify (a) (b) 4. Toda / Revenue 41 Previous Year Amount (Rs.) 20. Note: (i) Separate details shall be furnished for indigenous sales and export sales. Margin per Unit of Output/service rendered: Particulars 1.Purchased Goods/Outsourced services: Specify 2.Loan License Basis/third party services (Specify) 3.Own Manufactured/Self- rendered: (Specify) Current Year Sales/Revenue (Rs.) Cost of Sales Margin (Rs.) Sales/Revenue(Rs.) (Rs.) Previous Year Cost of Sales (Rs.) Margin (Rs.) Note: (i) Above details shall be furnished for good(s)/service(s) covered. (ii) Separate details shall be furnished for margin on indigenous sales and export sales. Whereas the good(s)/service(s) (such as sugar, bulk drugs, formulations etc.) is so....
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.... Turnover as per excise/ST records 2 Turnover as per Annual Accounts (Net off Duties & Taxes) Amount (Rs.) - 44 3 Difference between (1-2) 4 Amount and reasons for difference 23. Profit Reconciliation: S. Particulars No. 1 Profit or Loss as per Cost accounting records 2 Add: incomes not considered in cost accounts: Specify 3 4 5 Less: expenses not considered in cost accounts: Specify Add: overvaluation of closing stock in financial accounts Add: under-valuation of opening stock in financial accounts 6 Less: under-valuation of closing stock in financial 7 accounts Less: overvaluation of opening stock in financial accounts 8 Adjustments for others, if any (specify) 9 Profit or Loss as per financial accounts Previous year Current year 24. Cost Statement: (for each good(s)/service(s) separately) 5. Particulars Quantity Rate per Amount Cost per Unit 45 No. 1 Material consumed: 2 1.Purchased: (a): Indigenous (specify) (b): Imported (specify) 2. Self-Manufactured/Rendered (specify) Process Chemicals (specify) 3 Utilities: ....
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....2 Total margin (including export benefits) Ex-factory price (excluding sales tax) Maximum retail price (excluding sales tax etc.) Maximum retail price, if any, prescribed by the Government/statutory body etc. Note: 1. Separate proforma shall be prepared for each type/variety/ description of good(s)/service(s) under reference. 2. Separate proforma shall be prepared for the quantity used for captive consumption, quantity sold within the country and the quantity exported. Expenses incurred on export and the incentive earned thereon shall be indicated in the proforma applicable for the quantity produced and exported. 3. Separate proforma shall be prepared for any related party/inter-unit transfer of intermediate/finished good(s)/service(s) under reference. 4.. The proforma may be suitably modified to cover the special features, if any, of the good(s)/service(s) covered. 5.. Indicate whether the prices of the good(s)/service(s) covered are ex-factory prices, F.O.R prices, door delivery prices or any other terms. In case of ex-factory prices, whether cost of dispatch packing materials, freight, insurance and delivery charges are recoverable....