Corporates having annual turnover of Rs 35 crore and above would be required to mandatorily maintain cost records, as per the new norms notified by the government.
At the same time, the Corporate Affairs Ministry has expanded the ambit of cost auditing by including entities that are into coffee, tea and milk powder businesses.
The changes have been brought in by the Corporate Affairs Ministry by way of amendments to rules for cost records and audit under the Companies Act, 2013. The previous set of rules in this regard was notified in June last year.
The latest move has come at a time when the government has already proposed certain major amendments to the newly-implemented Companies Act, whose provisions started coming into effect from April 1, 2014. Amendments are also being made to rules applicable under different sections of the Act.
The requirement of maintaining cost records would be applicable to certain class of companies that meet the threshold level of Rs 35 crore. Such entities have been broadly classified into 'regulated' and 'unregulated' sectors.
Further, certain class of "industry/sector/product/ service" including coffee, tea and milk powder, would have to maintain cost records if they meet the threshold level.
Now companies, including foreign ones, engaged in "the production of the goods or providing services... Have an overall turnover from all its products and services of Rs 35 crore or more during the immediately preceding financial year, shall include cost records for such products or services in their books of account".
Through a notification, dated December 31, 2014, the Ministry has made the amendments.
Entities engaged in as many as six sectors have been brought under the regulated category. They are telecommunication services; power generation, transmission, distribution and supply; petroleum products; drugs and pharmaceuticals; fertilisers; sugar and industrial alcohol.
Those coming under these categories would also be required to carry out cost audits, if their overall annual turnover is Rs 50 crore or more and the aggregate turnover of the individual products or services -- where cost records are required -- is at least Rs 25 crore.
In the case of unregulated category, the Ministry has named 33 "industry/sector/product/service". The newly introduced ones include coffee and tea; milk powder; plastics and polymers; glass; textiles; electricals or electronic machinery.
As per the amended rules, entities -- falling under the unregulated category -- and having minimum annual turnover of Rs 100 crore would need to carry out cost audits. Another criteria would be that aggregate turnover of the individual products or services -- where cost records are to be maintained -- is at least Rs 35 crore.
