with Section 148 of the Companies Act, 2013
with Section 148 of the Companies Act, 2013

Ministry of Corporate Affairs (MCA) has recently issued numerous notices to companies for non-compliance with Section 148 of the Companies Act, 2013. The primary reason for these notices is the failure to file Cost Audit Reports (Form CRA-4) on time or at all. Companies might not prioritize the timely filing of Cost Audit Reports, assuming there would be no legal risks. But the current regulatory landscape has changed as the MCA sends show cause notices and non-compliance leads to penalties and legal actions. In this article, let’s explore this issue in more detail.

Reasons for MCA Show-Cause Notices

MCA has issued notices to companies based on the following two grounds:

  • Non-filing of the Cost Audit Report despite being applicable.
  • Delay in filing the Cost Audit Report beyond the prescribed time limit.

What is Cost Audit?

Cost audit is a process that reviews a company’s cost records and accounts to ensure they are accurate and comply with regulations. It helps businesses identify inefficiencies, reduce costs, and improve financial performance. In India, cost audits are mandatory for certain companies under the Companies Act, 2013, as regulated by the Ministry of Corporate Affairs (MCA). Non-compliance with cost audit rules and regulations leads to penalties and legal problems.

Key Cost Audit Forms Under MCA Compliance

To understand the compliance requirements, it is important to recognize the two key forms related to cost audits:

  • Form CRA-2: Intimation of appointment of a cost auditor by the company to the Central Government.
  • Form CRA-4: Filing of the Cost Audit Report in XBRL format with the Central Government.  

Applicability of MCA Cost Audit Compliance

The applicability of cost audit compliance is governed by Section 148 of the Companies Act, 2013. The criteria for applicability differ for companies in regulated and non-regulated sectors, based on their turnover in the immediately preceding financial year:

Regulated Sector: 

Companies in regulated sectors such as telecommunications, electricity, petroleum and gas, drugs and pharmaceuticals, fertilisers, and sugar are required to conduct cost audits if they meet the following thresholds:

  • Overall Annual Turnover: ₹50 crore or more from all products/services.
  • Aggregate Turnover for Specific Products/Services: ₹25 crore or more for the individual product/service for which cost records are required to be maintained.

Non-Regulated Sector:

Companies in non-regulated sectors (companies not comes under regulated sectors) must conduct cost audits if they meet the following thresholds:

Timelines for Cost Audit Report Filing

Here are the timelines prescribed by the MCA for the companies to be followed for cost audit compliance:

  • Completion of Cost Audit Report: The Cost Audit Report must be completed and signed by the Cost Auditor within 180 days from the end of the financial year. For example, for FY 2024-25, the report should be completed by 27th September 2025.
  • Submission to the Board of Directors: The Cost Audit Report must be presented to the Board of Directors within the same timeframe as its completion (i.e., within 180 days from the end of the financial year).
  • Filing with MCA: The company must file the Cost Audit Report in XBRL format using Form CRA-4 within 30 days from the date of receipt of the report by the Board of Directors. For instance, if the report is received on 27th September 2025, the filing deadline would be 26th October 2025.  

Penalties for Cost Audit Non-Compliance

Non-compliance with cost audit requirements under Section 148 of the Companies Act, 2013, can lead to significant penalties for companies, cost auditors and their officers.

Key Takeaways for Companies

With the government’s increasing focus on regulatory compliance, Directors, Company Secretaries, and CFOs should ensure adherence to Section 148 requirements. This includes: