In India, cost records are maintained by companies to ensure that their production and operations are in compliance with the relevant cost accounting standards. The cost records provide information on the cost of goods produced and sold, and help companies identify areas where cost efficiencies can be achieved. In this article, we will explore the applicability of cost records and the penalties for non-compliance.
Applicability of Cost Records
The Companies Act, 2013, mandates the maintenance of cost records for specific companies engaged in manufacturing, mining, or processing activities. These companies are required to maintain cost records in the prescribed format and submit them to the Ministry of Corporate Affairs (MCA) annually. The applicability of cost records is based on the following criteria:
- Turnover:
Companies that have a turnover of more than INR 50 crore in the previous financial year are required to maintain cost records.
2. Nature of Business:
Companies engaged in the manufacturing, mining, or processing of goods are required to maintain cost records.
3. Industry-Specific Notifications:
Certain industries have been notified by the MCA, requiring them to maintain cost records, regardless of their turnover.
Penalties for Non-Compliance
Non-compliance with cost record maintenance requirements can result in significant legal and financial penalties for companies. The penalties for non-compliance are as follows:
- Monetary Penalties:
Companies that fail to maintain cost records or submit them within the prescribed time limit may be subject to a fine of up to INR 1 lakh.
2. Imprisonment:
The Companies Act, 2013, provides for imprisonment of up to one year for the company's officers who are found guilty of non-compliance.
3.Revocation of License:
The MCA may revoke the license of a company that fails to comply with the cost record maintenance requirements.
Table A and Table B are two different schedules listed in the Companies (Cost Records and Audit) Rules, 2014. These schedules categorize industries based on their activities and annual turnover, and determine whether the companies falling under these industries are required to maintain cost records and undergo cost audit.
Table A companies are those engaged in specific industries such as manufacturing of products or providing services, and whose aggregate value of net worth, turnover, or total paid-up capital exceeds the limit specified in the rules. These companies are required to maintain cost records and undergo cost audit as per the rules.
Table B companies, on the other hand, are engaged in other industries where cost audit is not applicable, but are required to maintain cost records if their annual turnover exceeds a specified limit. These companies include industries such as telecommunication, mining, and electricity generation, transmission, and distribution.
It is important to note that while Table A and Table B provide a general idea of the industries and companies that are required to maintain cost records, the applicability of cost records and cost audit can vary based on the specific criteria mentioned in the rules. Companies falling under any of the industries mentioned in Table A or Table B should refer to the rules and guidelines provided by the Ministry of Corporate Affairs to ensure that they comply with the relevant provisions.
Cost records are an important tool for companies to identify areas where cost efficiencies can be achieved. The Companies Act, 2013, mandates the maintenance of cost records for specific companies engaged in manufacturing, mining, or processing activities. Companies that fall under the purview of the cost record maintenance requirements must ensure that they comply with the relevant provisions. Failure to comply with the cost record maintenance requirements can result in significant legal and financial penalties for companies. Companies must ensure that they maintain the cost records and submit them within the prescribed time limit to avoid these penalties.
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