Under Rule 3, every company governed by the Companies Act 2013 that is engaged in the production of goods or provision of services specified in the Annexure — and whose aggregate net worth is ₹1 crore or more OR whose turnover from the relevant products/services is ₹35 crore or more — must maintain cost records in accordance with the Cost Accounting Standards.
These are sectors where the government directly controls prices, subsidies, or tariffs. Cost records are the basis for regulatory decisions.
| # | Sector / Product | Regulatory Body |
|---|---|---|
| 1 | Petroleum & Natural Gas (Crude oil refining, petroleum products) | MoPNG / PPAC |
| 2 | Drugs & Pharmaceuticals (Bulk drugs, formulations) | NPPA / CDSCO |
| 3 | Fertilisers (Nitrogenous, phosphatic, potassic) | Department of Fertilisers |
| 4 | Sugar & Khandsari Sugar | Department of Food & PD |
| 5 | Electricity (Generation, Transmission, Distribution) | CERC / SERC |
| 6 | Telecommunications (Basic & mobile telephony, ISP) | TRAI / DoT |
| 7 | Jute & Jute Products | Ministry of Textiles |
These sectors operate in competitive markets but are significant from a national economic perspective.
| # | Sector / Product |
|---|---|
| 1 | Steel & Iron Products (all categories) |
| 2 | Cement, Cement Products, and Clinker |
| 3 | Aluminium & Aluminium Products |
| 4 | Tyres & Tubes (Rubber-based automotive products) |
| 5 | Paper & Paperboard |
| 6 | Textiles (Cotton yarn, synthetic, woven fabrics) |
| 7 | Chemicals, Pesticides & Dyes |
| 8 | Automobiles & Auto Parts |
| 9 | Mining & Minerals |
| 10 | Railway Wagons, Coaches, Locomotives |
| 11 | Rubber & Allied Products |
| 12 | And 20+ more sectors… |
Rule 4 mandates that companies in the above sectors ALSO undergo a statutory cost audit if their net turnover exceeds the specified thresholds. Cost audit is conducted by a registered Cost Auditor (CMA) appointed by the Board of Directors.
Threshold: Net turnover from regulated products ≥ ₹50 Crore in the immediately preceding financial year
Companies in Petroleum, Pharma, Fertilisers, Sugar, Power, Telecom sectors meeting this threshold must mandatorily appoint a registered Cost Auditor.
Threshold: Net turnover from non-regulated products ≥ ₹100 Crore in the immediately preceding financial year
Steel, Cement, Automobiles, Textiles, Paper, and other Table B sector companies meeting this threshold require cost audit.
| Activity | Form | Deadline |
|---|---|---|
| Cost Auditor Appointment (Board Resolution) | — | Within 180 days of start of FY (by 30 Sep for April-March FY) |
| Intimation of Appointment to MCA | CRA-2 | Within 30 days of Board resolution |
| Cost Audit Report to Company's Board | CRA-3 | Within 180 days of FY end (by 30 Sep) |
| Filing of Cost Audit Report with MCA | CRA-4 (XBRL) | Within 30 days of receipt by Board |
| Cost Records (maintenance) | — | Continuous — must be maintained throughout the year |
Penalty up to ₹5 Lakh for failure to maintain cost records (Section 148(8)) or failure to file the cost audit report.
Penalty up to ₹1 Lakh for every officer in default — including the CFO, Managing Director, and Whole-time Director.
No. Applicability is based on turnover of the immediately preceding financial year. A company incorporated in Year 1 will check Year 1's turnover to determine if cost records are needed in Year 2. If turnover in Year 1 meets the threshold, cost records must be maintained from Year 2.
Yes. Rule 3 (cost records) and Rule 4 (cost audit) are separate obligations. A company can be required to maintain cost records (Rule 3) even if it is below the cost audit turnover threshold (Rule 4). Only companies in the specified industries that exceed the Rule 3 threshold must maintain records.
Net turnover = Gross turnover (from products/services in the specified industry) minus Indirect taxes (GST, excise duty collected on behalf of government). The threshold applies only to the net turnover from the specified products — not the company's total consolidated turnover.
Once a company meets the cost audit threshold, it must continue conducting cost audits in subsequent years, even if turnover subsequently falls below the threshold — unless the turnover falls below the threshold for 3 consecutive years. Companies should seek legal advice on exemption claims from the Central Government.
No. A cost audit must be conducted by a registered Cost Auditor — a Fellow or Associate Member of ICMAI (Institute of Cost Accountants of India) authorised to practise as a cost auditor. A Chartered Accountant (ICAI member) is NOT eligible to conduct a statutory cost audit under Section 148 of the Companies Act 2013.
