TaxTMI 
TaxTMI 
Companies (cost records and audit) Amendment Rules, 2017
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....ure, for Form CRA-I and Form CRA-3, the following Forms shall respectively be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2016, namely:- "FORM CRA-I (See 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 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 or captive consumption s....
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....ding 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 ....
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.... 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 per cent. 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 and other related matters 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) Subsidy or grant or incentive and any such payment received or receivable with respect to any employee cost shall be reduced from cost of the cost object in the financial year when such subsidy or grant or ince....
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....e. 3. Utilities.- (a) Proper records shall be maintained showing the quantity and cost of each major utility such as power, water, steam, effluent treatment, and other related utilities 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 inter-....
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....applied for the measurement of the cost of utilities shall be made only if, it is required by law 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 disco....
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....ct 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 disco....
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....ll be deducted to arrive at the net repairs and maintenance cost. (r) 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 a change would result in a more appropriate preparation or presentation of cost statements of an organisation. (s) Repairs and maintenance costs shall be traced to a cost object to the extent economically feasible. (t) 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. (u) 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....
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....e 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) Subsidy or grant or incentive and any such payment received or receivable with respect to overheads shall be reduced from cost of the cost object in the financial year when such subsidy or grant or incentive and any such payment is recognised as income. (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 ....
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....f 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) Subsidy or grant or incentive and any such payment received or receivable with respect to any administrative overheads shall be reduced from cost of the cost object in the financial year when such subsidy or grant or incentive and any such payment is recognised as income. (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....
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....entification 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. (k) Records for transportation cost for exempted goods, excisable ....
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.... received or receivable with respect to amount of royalty and technical know-how fee shall be reduced from cost of the cost object in the financial year when such subsidy or grant or incentive and any such payment is recognised as income. (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 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, namely:- i) ....
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....e and any such payment is recognised as income. (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 and 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)  ....
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.... 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) Subsidy or grant or incentive and any such payment received or receivable with respect to any quality control cost shall be reduced from cost of the cost object in the financial year when such subsidy or grant or incentive and any such payment is recognised as income. (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 a change would result in a more appropriate preparation or presentation of cost statements of an organisation. (k) Quality ....
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....e 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 co....
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....ld 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:- (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. 14. Service Department Expenses.- (a) Proper records shall be ....
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....t 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) Subsidy or grant or incentive and any such payment received or receivable with respect to any service cost centre shall be reduced from cost of the cost object in the financial year when such subsidy or grant or incentive and any such payment is recognised as income. (o) The cost of production and distribution of the service shall be determined based on the normal capacity or actual capacity utilisation 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 cos....
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....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) Subsidy or grant or incentive and any such payment received or receivable with respect to packing material shall be reduced from cost of the cost object in the financial year when such subsidy or grant or incentive and any such payment is recognised as income. (i) Issue of packing materials shall be valued using appropriate method as per the provisions contained in the accounting standard applicable for the time being in force. (j) Wherever, packing material costs include transportation costs, determination of costs of transportation shall be in accordance with paragraph number 9 on determination of cost of transportation. (k) Packing material costs shall not ....
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....ted costs. (e) Subsidy or grant or incentive and any such payment received or receivable with respect to finance costs shall be reduced from cost of the cost object in the financial year when such subsidy or grant or incentive and any such payment is recognised as income. (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 finance costs. 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 finance costs for production of goods or operations or services rendered; (h) Assignment of finance costs to the cost objects shall be 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 - to be apportioned to the various cost objects in proportion to the benefits received by t....
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....ersion 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, and actual sales realisation of by-product shall be maintained. The proper records shall be maintained in respect of credi....
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....etermine normal price shall 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; or 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 goods, rendering of services, process materials and rejected goods including scraps, and other related materials; 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 rende....
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....antitative 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 utilisation (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. (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 utilised, duties or taxes recovered and interest or penalty paid. (d) If the compan....
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....ection 148 of the Companies Act, 2013 (18 of 2013) of. name of the company) having its registered office at 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 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 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 ....
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....l of rounding used in cost statements (in INR) Absolute/thousands/lacs/crores 11 Whether Indian Accounting Standards are applicable to the company Yes/No 12 Number of cost auditors for reporting period 13 Date of board of directors meeting in which annexure to cost audit report was approved 14 Whether cost auditors report has been qualified or has any reservations or contains adverse remarks 15 16 17 Consolidated qualifications, reservations or adverse remarks of all cost auditors Consolidated observations or suggestions of all cost auditors Whether company has related party transactions for sale or purchase of goods or services 2. General Details of Cost Auditor 1 Whether cost auditor is lead auditor 2 Category of cost auditor 3 Firm's registration number 4 Name of cost auditor/cost auditor's firm 5 PAN of cost auditor/cost auditor's firm 6 Address of cost auditor or cost auditor's firm 7 8 9 10 Email id of cost auditor or cost auditor's firm Membership number of member signing report Name of member signing report Name(s) of product(s) or service(s) with....
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..../Service Tax Records Note: 1) Explain the difference, if any, between Turnover 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 Particulars 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 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 Adjus....
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....for different unit of measures. 2. The items of cost shown in the Proforma are indicative and the same shall be reflected keeping in 3. 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 Category UOM Material Quantity Current Year Rate per Unit Previous Year Rate per Amount Quantity (Rs.) 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 Product CETA Heading Current Year Description of Material UOM Quantity Rate per Unit Rate per Amount Quantity (Rs.) Previous Year Unit Amount (Rs.) 1. 33 2. 3. 4. 5. 6. 7. 8. 9. 10. 2C. Details of Industry Specific Operating Expenses ....
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....gin [Profit/(Loss) as per Cost Accounts] (26 - 25) NOTES: 1. Separate cost statement shall be prepared for each service 2. The 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. 3. The proforma may be suitably modified to meet the requirement of the industry/service. 4. In case the company follows a pre-determined or standard costing system, the above cost statement 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 Category UOM Material Quantity Current Year Rate per Unit Previous Year Rate per Amount Quantity (Rs.) Unit Amount (Rs.) 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) 1. Current Year Description of Material UOM Quantity Rate per Unit (Rs.) Amount Quantity 36 Previous Year Rate per Unit Amount ....
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....ings available for distribution 1 2 Distribution of Earnings to: Employees as salaries and wages, retirement benefits, etc. Shareholders as dividend 3 Company as retained funds 4 5 Government as taxes (specify) Exceptional and Extra Ordinary Expenses, if any 6 Others, if any (specify) 7 Total distribution of earnings Current Year Rs. Previous Year Rs. 4. FINANCIAL POSITION AND RATIO ANALYSIS (for the company as a whole) Sno. Particulars Units A. Financial Position 1 Share Capital (see Note 1) 2 Reserves and Surplus (see Note 1) 3 Long Term Borrowings (see Note 1) 4 (a) Gross Fixed Assets (b) Net Fixed Assets (see Note 1) 5 (a) Current Assets 39 Current Year Previous Year B. (b) Less: Current Liabilities (c) Net Current Assets 6 Capital Employed (see Note 2) 7 Net Worth (see Note 3) Financial Performance 1 Value Added 2 Net Revenue from Operations of Company 3 Profit before Tax (PBT) C. Profitability Ratios 1 PBT to Capital Employed (B3/A6) 2 PBT to Net Worth (B3/A7) 3 PBT to Value Added (B3/B1) 4 D. PB....