Section 148 · Cost records and cost audit
Cost Audit and Cost Records — Who Is Caught, and When
Cost audit is the audit people forget until a notice arrives. It is separate from the statutory audit and from the tax audit, it turns on your sector as well as your turnover, and it has two distinct tests — one for keeping cost records, a higher one for having them audited.
Short answer
Keeping cost records and getting a cost audit are different tests. A company in a covered sector must maintain cost records if its overall turnover in the preceding financial year was ₹35 crore or more. It must also have them audited if it is in a regulated sector and has overall turnover of ₹50 crore or more and turnover of ₹25 crore or more from the covered product or service, or in a non-regulated sector with ₹100 crore overall and ₹35 crore from the covered product or service.
Exports of more than 75% of revenue in foreign exchange, operating from a special economic zone, and captive power generation are exempt from cost audit, and micro and small enterprises are exempt under rule 3. Small-company status is not an exemption.
The two tests
Section 148 of the Companies Act, 2013 and the Companies (Cost Records and Audit) Rules, 2014 divide covered industries into Table A (regulated sectors) and Table B (non-regulated sectors). Both tables are annexed to the rules; check your product or service against them rather than assume.
| Table A — regulated sectors | Table B — non-regulated sectors | |
|---|---|---|
| Cost records (rule 3) | Overall turnover ₹35 crore or more | Overall turnover ₹35 crore or more |
| Cost audit (rule 4): overall turnover | ₹50 crore or more | ₹100 crore or more |
| Cost audit (rule 4): turnover from the covered product or service | ₹25 crore or more | ₹35 crore or more |
For a cost audit both turnover tests must be met. A Table A company with ₹60 crore of overall turnover, only ₹10 crore of it from the covered product, keeps cost records but does not need a cost audit.
Who is exempt
Rule 4(3) exempts from cost audit a company:
- whose revenue from exports, in foreign exchange, exceeds 75% of its total revenue; or
- which is operating from a special economic zone; or
- which is engaged in generation of electricity for captive consumption through a captive generating plant.
Separately, rule 3 ends by saying that nothing in it applies to a company classified as a micro or small enterprise under the Micro, Small and Medium Enterprises Development Act, 2006. Because the cost audit rule applies to companies covered by rule 3, such a company is outside both tests.
Check your MSME status before relying on this. The MSME classification was revised from 1 April 2025 (notification S.O. 1364(E) of 21 March 2025, as reported by professional commentary): a small enterprise must have investment in plant and machinery or equipment of up to ₹25 crore and turnover of up to ₹100 crore. Meeting the turnover figure alone is not enough. We have not read the notification itself; check it, and your Udyam registration, before treating a company as exempt.
Small company is not the same as small enterprise. The small-company definition under the Companies Act gives no exemption from cost records or cost audit. The exemption turns on MSME classification, which is a different test run under a different Act.
Forms and deadlines
| Step | Form | Deadline |
|---|---|---|
| Maintain cost records | CRA-1 | Throughout the year |
| Board appoints a cost auditor | — | Within 180 days of the start of the financial year |
| Notify the appointment to the Central Government | CRA-2 | Within 30 days of the Board meeting, or within 180 days of the start of the financial year, whichever is earlier |
| Cost auditor gives the report to the company | CRA-3 | Within 180 days of the end of the financial year |
| Company files the report with the Central Government | CRA-4 | Within 30 days of receiving the report |
The appointment window runs from the start of the financial year, not the end — for a year beginning on 1 April, roughly to the end of September — which is earlier than many expect. These deadlines are from rule 6 as summarised in professional guidance; confirm against the rule text when you act on them.
Pending changes to section 148
Pending change — not law
The Corporate Laws (Amendment) Bill, 2026 proposes to give cost accounting standards statutory backing, to name the officer responsible for compliance (the managing director, the whole-time director in charge of finance, the CFO or a designated officer), and to add specific penalties for defaults such as not appointing a cost auditor or fixing the remuneration. The Bill was introduced in the Lok Sabha on 23 March 2026, the Joint Parliamentary Committee reported on 3 August 2026, and we found no sign of passage as of 1 October 2026.
Limited liability partnerships
Section 148 is in the Companies Act and speaks of companies. It is not among the provisions extended to LLPs, and we found no cost-audit requirement under the LLP Act. See Is cost audit applicable to an LLP?.
FAQ
Is cost audit applicable to a private limited company?
It depends on sector and turnover, not on whether the company is private. A private company in a covered sector that crosses the turnover tests is caught; one outside the tables, or below the tests, is not.
What is the difference between cost records and cost audit?
Cost records must be maintained at overall turnover of ₹35 crore or more in a covered sector. A cost audit is the audit of those records and applies only at higher turnover tests.
Is a cost audit the same as a statutory audit or a tax audit?
No. It is a separate audit under section 148, done by a cost auditor appointed by the Board, with its own forms and deadlines.
Is a small company exempt from cost audit?
Not because it is a small company. Exemption comes from the rule 4(3) grounds (exports above 75%, SEZ, captive power) or from being a micro or small enterprise under the MSME Act.
When must the cost auditor be appointed?
By the Board within 180 days of the start of the financial year.
Does an LLP need a cost audit?
We found no requirement. Section 148 is a Companies Act provision and has not been extended to LLPs.
Related
- Small company definition — the current limits
- Companies Act thresholds at a glance
- Annual compliance checklist — AOC-4 and MGT-7A
- Is cost audit applicable to an LLP? (llpconsultant.com)
Sources: Companies Act, 2013, section 148; Companies (Cost Records and Audit) Rules, 2014, rules 3, 4 and 6, as amended on 31 December 2014 (rule text for the exemptions read from a statute database; turnover figures and deadlines from professional summaries); Micro, Small and Medium Enterprises Development Act, 2006; Corporate Laws (Amendment) Bill, 2026 (Taxmann analysis). Penalty amounts are not stated on this page because we could not confirm the current figures.
Position as at 1 October 2026, based on section 148 of the Companies Act, 2013 and the Companies (Cost Records and Audit) Rules, 2014. Guidance, not legal advice.