2024-07-12 00:00:00
The committee, in its report submitted to the Ministry of Corporate Affairs (MCA), recommended raising the turnover limit to Rs 75 crore in the last three years for maintaining and auditing cost records.
Currently, these turnover limits are fixed at Rs 25 crore for companies in six regulated sectors and Rs 35 crore for companies in 33 unregulated sectors for mandatory cost audit. In addition, all companies with a turnover of Rs 35 crore or more are currently required to maintain cost accounts.
Currently, the MCA has sought comments from stakeholders on the report by the end of this month.
The report states that turnover is essentially the turnover of relevant products and services as specified in the Companies (Record and Audit of Costs) Rules, 2014.
The proposed recommendations also remove differential turnover limits for companies in regulated and unregulated sectors to undergo cost audits, a move that would effectively free all small and medium-sized enterprises and most small and medium-sized businesses from these compliance obligations, according to people familiar with the matter.
As per the rules, cost records are books of account relating to the utilisation of cost of materials, labour and other items in producing goods or services, in sync with Section 148 of the Companies Act. The 11-member committee headed by Ashu Mathur, chief cost adviser, expenditure department, was constituted in October last year.
A company’s cost accounts are crucial for tax calculations and obtaining government assistance, including the Production Linked Incentive (PLI) scheme or official project execution.
“(MCA) is positive regarding the panel’s report and appropriate changes will be incorporated when the Companies Act and rules are amended next time,” one of the people told ET.
The Infrastructure Projects Committee also recommended an overhaul of the Companies (Records of Costs and Audit) Rules, 2014, particularly in relation to infrastructure projects, and a revision of the list of sectors in which companies have to keep such records.
The committee recommended that all government infrastructure projects worth Rs 100 crore or more should keep proper records of time and cost. The committee called on independent cost accountants to submit reports to the relevant ministries or departments every quarter or half year to analyze the time and cost overruns of the projects.
The recommendations are also aimed at strengthening the current cost accounting and auditing system to ensure that the huge sums of money allocated by the government for various projects are used prudently.
The panel also said that the principles and practices of maintenance of cost accounting records and auditing “may be extended to cooperative societies, trusts, autonomous bodies, other institutions like public transport service providers including railways, metros and state road transport etc.” It also wants such practices to be extended to all sectors receiving government assistance or engaging in activities covered under CCRA rules.
The committee urged that the number of industries requiring companies to keep such cost accounts be cut to 35 from the current 39.
The committee called on the MCA to review existing cost accounting standards to “harmonize project reporting in records and audit reports.” The committee suggested that key cost trends may also be included in the annual reports of relevant companies.
The Audit Framework Committee believes that a few sectors such as healthcare, telecommunications and infrastructure may require separate cost audit formats. The committee called on the MCA to develop separate cost audit formats for these sectors in consultation with stakeholders, while “taking into account that companies will not bear a significant compliance burden”.
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