Section 148 of the Companies Act, 2013 allows the Central Government to require companies producing specified goods or providing specified services to maintain cost records and, above a further threshold, to have them audited. The detail is in the Companies (Cost Records and Audit) Rules, 2014.
Two tests: records first, then audit
The rules apply in two steps.
- Cost records (Rule 3). A company engaged in a product or service listed in Table A (regulated sectors) or Table B (non-regulated sectors) must maintain cost records if its overall turnover from all products and services in the immediately preceding financial year was ₹35 crore or more.
- Cost audit (Rule 4). Of those companies, a cost audit is required where the turnover thresholds below are met in the immediately preceding financial year.
| Sector | Overall turnover of the company | Turnover of the individual product or service |
|---|---|---|
| Regulated (Table A) | ₹50 crore or more | ₹25 crore or more |
| Non-regulated (Table B) | ₹100 crore or more | ₹35 crore or more |
Products are identified by their Customs Tariff (CETA) headings in the tables. A company with several covered products tests each one separately against the individual product threshold.
Exemptions
Rule 4(3) excludes a company from cost audit where, for example:
- its revenue from exports in foreign exchange exceeds 75% of total revenue; or
- it operates from a Special Economic Zone; or
- it is a micro or small enterprise under the Micro, Small and Medium Enterprises Development Act, 2006.
An exemption from audit does not by itself remove the obligation to maintain cost records. Each exemption should be checked against the exact wording of the rule.
Who may be appointed
Only a Cost Accountant in practice — an individual holding a certificate of practice from The Institute of Cost Accountants of India, or a firm of such Cost Accountants — may be appointed as cost auditor (section 148(3)). The statutory auditor of the company cannot act as its cost auditor.
Timeline
| Step | Who | Time limit |
|---|---|---|
| Board appoints cost auditor | Company | Within 180 days of the start of the financial year |
| Intimation in Form CRA-2 | Company | Within 30 days of the board meeting, or 180 days from the start of the year, whichever is earlier |
| Cost audit report in Form CRA-3 | Cost auditor | To the Board within 180 days from the close of the financial year |
| Filing of report in Form CRA-4 (XBRL) | Company | Within 30 days of receiving the report |
The remuneration of the cost auditor is ratified by the shareholders.
Illustration
A manufacturing company had overall turnover of ₹140 crore in FY 2025-26. Its two products fall in Table B: product X with turnover of ₹90 crore and product Y with ₹20 crore.
- Cost records: required for both products, because overall turnover exceeds ₹35 crore.
- Cost audit: required for product X (overall ≥ ₹100 crore and product ≥ ₹35 crore). Not required for product Y, whose turnover is below ₹35 crore.
Points that often cause difficulty
- Which year’s turnover: the thresholds use the immediately preceding financial year.
- Turnover definition: the rules use gross turnover from the sale of products and services, including export turnover.
- Trading turnover: traded goods are not covered products, though they count in overall turnover.
Official sources
- Ministry of Corporate Affairs — Companies Act, 2013 and Rules
- The Institute of Cost Accountants of India — Cost Accounting Standards Board