The Companies (Cost Record and Audit) Rules 2014 shall be applicable from the date of its publication in official gazette of India and published in official gazette on 1st July 2014 (Notificiation is dated as 30th June 2014).
Applicability of Cost Record [Rule 3]:
For the purpose of sub-section (1) of section 148 of the Act, the following class of companies,
including Foreign Companies defined in sub-section (42) of section 2 of the Act, shall be required to include cost records in their books of account, namely:-
(A) Companies engaged in the production of following goods in strategic sectors, such as:
- machinery and mechanical appliances used in defence, space and atomic energy sectors excluding any ancillary item or items;
- turbo jets and turbo propellers;
- arms and ammunitions;
- propellant powders; prepared explosives, (other than propellant powders); safety fuses; detonating fuses; percussion or detonating caps; igniters; electric detonators;
- radar apparatus, radio navigational aid apparatus and radio remote control apparatus;
- tanks and other armoured fighting vehicles, motorised, whether or not fitted with weapons and parts of such vehicles, that are funded (investment made in the company) to the extent of ninety per cent. or more by the Government or Government Agencies;
This provisions shall be applicable, if the net worth of the company is rupees five hundred crore or more or the turnover is rupees five hundred crore or more.
(B) companies engaged in an industry regulated by a Sectoral Regulator or a Ministry or Department of Central Government:
- Port services of stevedoring, pilotage, hauling, mooring, re-mooring, hooking, measuring, loading and unloading services rendered by a Port in relation to a vessel or goods regulated by the Tariff Authority for Major Ports under section 111 of the Major Port Trusts Act, 1963(38 of 1963);
- Aeronautical services of air traffic management, aircraft operations, ground safety services, ground handling, cargo facilities and supplying fuel rendered by airports and regulated by the Airports Economic Regulatory Authority under the Airports Economic Regulatory Authority of India Act, 2008 (27 of 2008);
- Telecommunication services made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature (other than broadcasting services) and regulated by the Telecom Regulatory Authority of India under the Telecom Regulatory Authority of India Act, 1997 (24 of 1997);
- Generation, transmission, distribution and supply of electricity regulated by the relevant regulatory body or authority under the Electricity Act, 2003 (36 of 2003), other than for captive generation (as defined under the Electricity Rules 2005);
- Steel;
- Roads and other infrastructure projects;
- Drugs and Pharmaceuticals;
- Fertilisers;
- Sugar and industrial alcohol;
- Petroleum products regulated by the Petroleum and Natural Gas Regulatory Board under the Petroleum and Natural Gas Regulatory Board Act, 2006(19 of 2006);
- Rubber and allied products being regulated by the Rubber Board.
The thresholds limit for applicability of this provision shall be as under, -
- in the case of a multi-product or a multi services company (i.e. a company producing more than one product or service), any product or a service for which the individual turnover (from such specific product or such specific service) is rupees fifty crore or more;
- 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.
In the case of companies engaged in an industry regulated by a sectoral regulator, the requirements of sectoral regulator regarding cost records shall be taken into account.
(C) Companies operating in areas involving public interest such as:
- Railway or tramway locomotives, rolling stock, railway or tramway fixtures and fittings, mechanical (including electro mechanical) traffic signalling equipment’s of all kind;
- Mineral products including cement;
- Ores;
- Mineral fuels (other than Petroleum), mineral oils etc.;
- Base metals;
- Inorganic chemicals, organic or inorganic compounds of precious metals, rare-earth metals of radioactive elements or isotopes, and Organic Chemicals;
- Jute and Jute Products;
- Edible Oil under Administrative Price Mechanism;
- Construction Industry;
- Companies engaged in health services viz. functioning as or running hospitals, diagnostic centres, clinical centres or test laboratories;
- Companies engaged in education services, other than such similar services falling under philanthropy or as part of social spend which do not form part of any business.
The thresholds limit for this Rule shall be as under, -
- in the case of a multi-product or a multi services company (i.e. a company producing more than one product or service), any product or a service for which the individual turnover (from such specific product or such specific service) is rupees fifty crore or more;
- 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:-
- Cardiac Stents;
- Drug Eluting Stents;
- Catheters;
- Intra Ocular Lenses;
- Bone Cements;
- Heart Valves;
- Orthopaedic Implants;
- Internal Prosthetic Replacements;
- Scalp Vein Set;
- Deep Brain Stimulator;
- Ventricular peripheral Shud;
- Spinal Implants;
- Automatic Impalpable Cardiac Deflobillator;
- Pacemaker (temporary and permanent);
- patent ductus arteriosus, atrial septal defect and ventricular septal defect closure device;
- Cardiac Re-synchronize Therapy ;
- Urethra Spinicture Devices;
- Sling male or female;
- Prostate occlusion device; and
- Urethral Stents.
The thresholds limit for this provision shall be as under, -
- in the case of a company engaged in multiple products, any product or device for which the individual turnover (from such specific product or device) is rupees ten crore or more, or one third of the turnover, whichever is less.
- in the case of a company engaged in one specific product or device, if it has net worth of rupees one hundred and fifty crore or more or the turnover is rupees twenty five crores or more;
Rules not applicable [Rule 7]
The requirement for cost audit under these rules shall not be applicable to a company which is covered under rule 3, and—
- whose revenue from exports, in foreign exchange, exceeds seventy five per cent of its total revenue or
- which is operating from a special economic zone.
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