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Home arrow News arrow Govt. levys, taxes and budget arrow Waiver of cost audit, rules for industries not producing essential goods: CII
Waiver of cost audit, rules for industries not producing essential goods: CII Print E-mail
Written by Ganesh   
Tuesday, 29 January 2008
New Delhi: CII has recommended that all Industries which are outside the ambit of Essential Commodities Act 1955, be exempted for the Cost Accounting Rules notified under the Companies Act with immediate effect. The scope of cost record rules may be considered to be limited to industries that produce goods that are of essential nature since intense competition due to globalization and removal of license raj perforce ensures Indian Industry to produce and market its quality output most efficiently and cost effectively.

Section 209(1)(d) of the Companies Act 1956 provides maintenance of cost records for various industries. Presently, 44 industries have been mandated to maintain cost accounting records including details about production - quality control, raw material consumption, R & D expenses, export obligation, royalty payments, fixed assets and depreciation etc.

It is important that the need for regulation in the particular industry be considered while notifying a particular industry for mandatory maintenance of cost records.

Maintenance of cost accounting records entails a huge cost for companies in terms of time and money since they are required to be maintained in very minute and detailed manner. Details of all components of cost have to be included even though it may be insignificant. It may, at times, not be possible to extract such minute details even through a sophisticated ERP system. Maintenance of cost records is difficult for companies that produce multiple commodities, as actual consumption records have to be maintained for power, fuel and utilities per unit of production for each type of product. Moreover, non-application of these Rules to traded imported goods put our local industry to an unfair cost disadvantage, by unnecessarily increasing its transaction costs.

The apparent reasons for Cost Accounting is the grant of subsidies and to protect Government revenues. However, subsidized products need to submit specific cost data to their concerned Ministries for this purpose who prescribe their own formats for the same. Moreover, Government revenue is more than adequately assured by the Central Excise and Income tax laws.  E-governance in this sector has also brought about a lot of transparency for revenue collection.

 
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