Prepared by CMA Himadri Roy, reach me at [email protected] The Ministry of Corporate Affairs (MCA), Govt. of India, has notified the Companies (Cost Records and Audit) Rules, 2014 under the Companies Act, 2013 vide Gazette notification no. G.S.R. 425(E) dated 30th June, 2014. The same has various concerns and after a huge hue & cry, the MCA formed one Expert Committee of imminent professionals and ministry representative to reconsider the notified Rules and place its suggestions for amendments required. The MCA came up with an amendment of the before mentioned Rules named the Companies (Cost Records and Audit) Amendment Rules, 2014 dated 31st December, 2014. Unfortunately, the amendment too falls short to properly address the concerns of the original Rules on various grounds. With a prima-facie observation of the amendment, I prepared the major concern points based on my understanding. I strongly pitch for our institute's council members to consider the same and act for the profession in a do-or-die approach otherwise go for resignation en-mass to leave the the Govt. to decide of the profession.

Major Concerns: 1. There is no general applicability of Cost Records across industries. This goes against creating a cost conscious culture among industries (especially in comparatively small & medium sectors) and therefore goes contrary to the PM's 'Make in India' initiative which aims provide boost to domestic production/generation of cost-effective good quality products/services which can dominate market. 2. There is no provision for application of Cost Accounting Standards for preparation of Cost Records. 3. There is no scope of 'Compliance Report' by companies coming under purview of Cost Records but not under Cost Audit. 4. Several major and important industries kept outside the coverage of Cost Records & Cost Audit ( please refer Annex-1 ) when there is an increasing trend of undue profiteering among industries by confidentially arranging and opting illegal methods among themselves making substancial damages to fair competition norms. 5. Again the units operating in SEZ and companies having more than 75% of their turnover in foreign exchanges (which mainly refer to EOUs) are kept outside the purview of Cost Rules whereas just few days back the national auditor (CAG) highlighted that those units are being utilised as a safe heaven for evation of taxes & duties and do not perform their operations as intended. 6. There is no scope for 'Performance Appraisal Report' for companies coming under purview of Cost Audit which was a great step and offen appraised by industries. 7. The applicability clause of both for Cost Records and Cost Audit stipulates company as a whole turnover criteria AND individual product/service specific turnover criteria. Now there is scope of non-compliace with the Rules by companies which are now not required to declare individual product/service specific trunover in there annual report. 8. The concept of 'Product or Service Group' wise reporting in audit reports is done away with. This step may increase the chances of sensative cost data leackage of individual product/services, which was a major concern among industries against Cost Audit befor 2011. The industry concern was duly taken care of in the year 2011 with the introduction of 'Product or Service Group' wise reporting in modified Cost Audit Rules. 9. There still remains a big ambiguity regarding applicability, coverage, reporting system etc. for Cost Records and Cost Audit for FY 2014-15. 10. This one once again proved the capacity, credibility and visionary of our leaders representing the institute and profession.

Unfortunate issues with amended Cost Rules

Page 1 of 2

Major Concerns

Prepared by CMA Himadri Roy, reach me at [email protected]

Major Industries/Products left outside Cost Rules (Annex-1) Sl.No. Industry/Product/Services 1 Automobile, Automobile Parts and Accessories 2 Machinery and Mechanical appliances 3 Footwear and Parts thereof

4

Other Textile Fabrics or Products

CETA 8701 to 8716 8413 to 8487 6401 to 6406

Remarks Important for its contribution to the economy. Important for its necessity across industries & households. Important for its public necessity.

5001 to 5003; 5101 to 5105; 5201 to 5203; 5801 to 5811; 5901 to Important for its public usage. 5911; 6001 to 6006; 6301; 6101 to 6117; 6201 to 6217; 6302 to 6304; 6305 to 6310

6

Unmanufactured and Manufactured Tobacco and Tobacco Products Paints and Varnishes

7

Personal Care Products

8

The applicability clause of both for Cost Records and Cost

3203 to 3212 3303 to 3307; 8212; 9615 to 9616 3401 to 3402

9

Pearls, Diamonds, Stones and Jewellery Articles

7101 to 7118

10

Photographic and Cinematographic Goods

3701 to 3707

Important for being related to public interest.

11 12

Batteries and Accumulators Stationery Items

Important for its necessity across industries & households. Important for its necessity across industries & households.

13

Leather, Wood and Wood Products

14

Newsprint, Paper and Articles of Paper

15

Mineral Water, Aerated Drinks and Alcoholic Beverages

16

Confectioneries, Cocoa Products and other Prepared Food Products

8506 to 8507 9608 to 9612 4201 to 4203; 4205 to 4206; 4401 to 4421; 4701 to 4707 4801; 4802 to 4813; 4814; 4816 to 4823 2201 to 2202; 2203 to 2206; 2208 1704; 1806; 1801 to 1805; 1901 to 1905; 2001 to 2009; 2101 to 2106; 2501

5

Unfortunate issues with amended Cost Rules

2401 to 2403

Page 2 of 2

Important for its public consumption and its adverse effect to public health. Important for its necessity across industries & households. Important for its increasing public demands and contribution towards economy. Important for its necessity across industries & households. Important for its increasing public demands and foreign currency related issues.

Important for its necessity across industries & households. Important for being related to public interest. Important for being related to public consumption.

Important for being related to public consumption.

Annex-1