If your company is engaged in manufacturing or provision of certain services in India, there is a good chance that statutory cost audit applies to you. Yet, every year, dozens of companies receive show cause notices from the Ministry of Corporate Affairs (MCA) for failure to appoint a cost auditor or file the Cost Audit Report. This comprehensive guide explains exactly who needs a cost audit in FY 2024–25 — and what happens if you miss the compliance.
1. What is Statutory Cost Audit?
A statutory cost audit is an examination of the cost records of a company by a registered Cost Auditor (a Fellow or Associate Member of ICMAI authorised to conduct cost audits). It is mandated under Section 148 of the Companies Act 2013 and the Companies (Cost Records and Audit) Rules 2014.
The Cost Audit Report is filed in Form CRA-3 in XBRL format with the MCA, within 180 days from the close of the financial year. For companies following the April–March financial year, the deadline is 30th September each year.
2. The Two-Step Test for Cost Audit Applicability
Cost audit applicability requires both of the following conditions to be satisfied:
- Industry Test: Your company must be engaged in the production of goods or provision of services specified in the Annexure to the 2014 Rules (Table A — Regulated, or Table B — Non-Regulated).
- Turnover Test: Your company's net turnover from the specified products/services in the immediately preceding financial year must meet or exceed the specified threshold.
3. Turnover Thresholds for FY 2024–25
The thresholds below are based on the net turnover of the immediately preceding financial year (i.e., FY 2023–24 turnover determines FY 2024–25 applicability).
Table A — Regulated Sectors: Threshold ₹50 Crore
Companies in the following regulated sectors with net turnover from regulated products exceeding ₹50 crore (from specified products) must undergo cost audit:
- Petroleum & Natural Gas (crude oil refining, petroleum products)
- Drugs & Pharmaceuticals (bulk drugs, formulations)
- Fertilisers (nitrogenous, phosphatic, potassic, complex)
- Sugar & Khandsari Sugar
- Electricity (generation, transmission, distribution — for sale)
- Telecommunications (basic telephony, mobile services, ISPs)
- Jute & Jute Products
Table B — Non-Regulated Sectors: Threshold ₹100 Crore
Companies in the following non-regulated sectors with net turnover from applicable products exceeding ₹100 crore must undergo cost audit:
- Steel & Iron Products (all categories, including rolling mills)
- Cement & Clinker (OPC, PPC, blended cement)
- Aluminium & Aluminium Products
- Tyres, Tubes, and Other Rubber Products (automotive)
- Paper, Paperboard, and Paper Products
- Textiles (cotton yarn, synthetic yarn, woven fabrics)
- Chemicals (industrial, specialty, agro-chemicals, dyes)
- Automobiles & Auto Components (vehicles and parts)
- Glass & Glassware Products
- Mining & Minerals (coal, iron ore, limestone, bauxite)
- …and additional sectors listed in the Annexure
4. How is "Net Turnover" Calculated?
Net turnover = Gross turnover from specified products MINUS Indirect taxes collected (GST, cess).
Key points:
- The threshold applies to turnover from the specified products/services only — not the company's total turnover.
- Turnover includes domestic sales + exports of specified products.
- Job work revenue may or may not be included depending on the nature of work — seek professional advice.
- Inter-unit transfers at cost are not typically included in net turnover for threshold purposes.
5. Process: Appointing a Cost Auditor
- Board Resolution: The Board of Directors (or Audit Committee) must recommend and the Board must approve the appointment of a registered Cost Auditor.
- Consent & Certificate: The appointed Cost Auditor must provide a written consent and certificate confirming their eligibility.
- CRA-2 Filing: The company must intimate the MCA about the appointment by filing Form CRA-2 within 30 days of the Board resolution.
- Audit Execution: The Cost Auditor conducts the audit during or after the financial year, examining cost records and statements.
- CRA-3 / CRA-4 Filing: The Cost Audit Report (CRA-3) is submitted to the Board within 180 days of FY end, and then filed with MCA (CRA-4) within 30 days of receipt by the Board.
6. Key MCA Circulars and Updates (2024–25)
The MCA has been active in the cost audit space. Key developments relevant to FY 2024–25 include:
- XBRL Taxonomy Update: MCA updated the Cost Audit XBRL taxonomy for CRA-3 filing. Companies must ensure their Cost Auditor uses the latest MCA-approved XBRL software.
- CRA-2 Mandatory for All: The requirement to file CRA-2 within 30 days of appointment is being strictly enforced, with penalties for delayed filing.
- New Industries Added: Periodic notifications add new product categories to the regulated/non-regulated lists. Companies in new product lines should verify applicability annually.
7. Penalties for Non-Compliance
Section 148(8) of the Companies Act 2013:
- Company: Penalty of minimum ₹25,000 — maximum ₹5,00,000
- Every officer in default: minimum ₹10,000 — maximum ₹1,00,000
- If contravention continues: Additional penalty of ₹500 per day
8. A Quick Applicability Checklist
Before the financial year ends, ask these questions:
- ✅ Is our primary product/service listed in the Annexure to the 2014 Rules?
- ✅ Did our net turnover from those products exceed ₹50 Cr (regulated) or ₹100 Cr (non-regulated) in FY 2023–24?
- ✅ Have we filed CRA-2 within 30 days of appointing our Cost Auditor?
- ✅ Is the CRA-3 cost audit report ready and submitted to the Board before 30 September 2025?
- ✅ Has CRA-4 been filed with MCA (XBRL) within 30 days of Board receipt?
If you answered "No" to any of these, contact Jitin Sharma & Co immediately — penalties can be avoided with swift corrective action.
