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Implications of New Cost Audit Rules on CMA’s | ICWAI

Implications of New Cost Audit Rules on CMA’s | ICWAI

Implications of New Cost Audit Rules on CMA’s – The MCA has amended the Companies (cost records and audit) Rules, 2014 through Notification dt 14 July 2016 on “Companies (cost records and audit) Amendment Rules, 2016”

Implications of New Cost Audit Rules on CMA’s | ICWAI

In exercise ofthe powers conferred by sub-sections (1) and(2) of section 469 and section 148 of the Companies Act, 2013 (1.8 of 201.3) (hereinafter referred as the Act), the Central Government hereby makes the Implications of New Cost Audit Rules on CMA’s following rules further to amend the Companies (cost records and audit) Rules, 2014, namely:

Implications of New Cost Audit Rules on CMA’s | ICWAI Rule 1

(1) These rules may be called the Companies (cost records and audit) Amendment Rules, 2016. (2) They shall come into force on the date of their publication in the official Gazette.

Implications of New Cost Audit Rules on CMA’s| ICWAI Rule 2

In the Companies (cost records and audit) Rules, 2014 (hereinafter referred to as the Principal Rules).-

i) in rule 2, for clause (d), the following clause shall be substituted, namely:-

“(d) “cost audit report” means the duly signed cost auditor’s report on the cost records examined and cost statements which are prepared as per these rules, including attachment, annexure, qualifications or observations attached with or included in such report;”

ii) in rule 3, for Table (A) and Table (B), the following Tables shall be substituted, namely:-


(A) Regulated Sectors

SI.No.Industry/ Sector/ Product/ ServiceCentral       ExciseTariff                 Act

Heading (wherever applicable)

1.Telecommunication services made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature and regulated by the Telecom Regulatory Authority of India under the Telecom Regulatory Authority of India Act, 1997 (24 of 1997); including activities that requires authorisation or license issued by the Department of Telecommunications, Government of India under Indian Telegraph Act, 1885 (13 of 1885);Not applicable.
2.Generation, transmission, distribution and supply of electricity regulated by the relevant regulatory body or authority under the Electricity Act, 2003 (36 of 2003);Generation-2716;

Other Activity- Not Applicable

3.Petroleum products; including activities regulated by the Petroleum and Natural Gas Regulatory Board under the Petroleum and Natural Gas Regulatory Board Act, 2006 (19 of 2006);2709 to 2715;Other Activity- Not Applicable
4.Drugs and pharmaceuticals;2901 to 2942; 3001 to 3006.
5.Fertilisers;3102 to 3105.
6.Sugar and industrial alcohol;1701;           1703;2207.

(B) Non-regulated Sectors

SI.No.Industry/ Sector/ Product/ ServiceCentral Excise Tariff Act Pleading                                  (whereverapplicable)
1.Machinery and mechanical appliances used in defence, space and atomic energy sectors excluding any ancillary item or items;Explanation. – For the purposes of this sub-clause, any company which is engaged in any item or items supplied exclusively for use under this clause, shall be deemed to be covered under these rules8401; 8801 to 8805; 8901 to 8908.
2.Turbojets and turbo propellers;8411
3.Arms, ammunitions and Explosives;3601 to 3603; 9301 to 9306.
4.Propellant powders; prepared explosives (other than propellant powders); safety fuses; detonating fuses; percussion or detonating caps; igniters; electric detonators;3601 to 3603
5.Radar apparatus, radio navigational aid apparatus and radio remote control apparatus;8526
6.Tanks and other armoured fighting vehicles, motorised, whether or not fitted with weapons and parts of such vehicles, that are funded (investment made in the company) to the extent of ninety per cent or more by the Government or Government agencies;8710
7.Port services of stevedoring, pilotage, hauling, mooring, re-mooring, hooking, measuring, loading and unloading services rendered by a Port in relation to a vessel or goods regulated by the Tariff Authority for Major Ports;Not applicable.
8.Aeronautical services of air traffic management, aircraft operations, ground safety services, ground handling, cargo facilities and supplying fuel rendered by airports and regulated by the Airports EconomicNot applicable
Regulatory Authority under the Airports Economic Regulatory Authority of India Act, 2008 {27 of 2008);
9.Iron and Steel;7201 to 7229; 7301 to 7326
10.Roads and other infrastructure projects corresponding to para No. (1) (a) as specified in Schedule VI of the Companies Act, 2013 {18 of 2013);Not applicable.
11.Rubber and allied products; including products regulated by the Rubber Board constituted under the Rubber Act, 1947 (XXIV of 1947);4001 to 4017
12.Coffee and tea;0901 to 0902
13.Railway or tramway locomotives, rolling stock, railway or tramway fixtures and fittings, mechanical (including electro mechanical) traffic signalling equipment’s of all kind;8601 to 8608.
14.Cement;2523;6811 to 6812
15.Ores and Mineral products;2502 to 2522; 2524 to 2526; 2528 to 2530; 2601 to 2617
16.Mineral fuels (other than Petroleum), mineral oils etc.;2701 to 2708
17.Base metals;7401 to 7403; 7405 to 7413; 7419;7501 to 7508; 7601 to 7614; 7801 to 7802; 7804; 7806; 7901 to 7905; 7907; 8001; 8003; 8007; 8101 to 8113.
18.Inorganic chemicals, organic or inorganic compounds of precious metals, rare-earth metals of radioactive elements or isotopes, and organic chemicals;2801 to 2853; 2901 to 2942; 3801 to 3807; 3402 to 3403; 3809 to 3824.
19.Jute and Jute Products;5303, 5310
20.Edible Oil;1507 to 1518
21.Construction Industry as per para No. (5) (a) as specified in Schedule VI of the Companies Act, 2013 (18 of 2013);Not applicable.
22.Health services, namely functioning as or running hospitals, diagnostic centres, clinical centres or test laboratories;Not applicable.
23.Education services, other than such similar services falling under philanthropy or as part of social spend which do not form part of any business;Not applicable.
24.Milk powder;0402
26.Plastics and polymers;3901 to 3914; 3916 to 3921; 3925
27.Tyres and tubes;4011 to 4013
28.Paper;4801 to 4802.
29.Textiles;5004 to 5007; 5106 to 5113; 5205 to 5212; 5303; 5310; 5401 to 5408; 5501 to 5516
30.Glass;7003 to 7008; 7011; 7016
31.Other machinery and Mechanical Appliances;8402 to 8487
32.Electricals or electronic machinery;8501 to 8507; 8511 to 8512; 8514 to 8515; 8517; 8525 to 8536; 8538 to 8547.
33.Production, import and supply or trading of following medical devices, namely:-(i)  Cardiac stents;

(ii)  Drug eluting stents;

(iii)  Catheters;

(iv)  Intra ocular lenses;

(v)  Bone cements;

(vi)  Heart valves;

(vii)  Orthopaedic implants;

(viii) Internal prosthetic replacements;

(ix)  Scalp vein set;

(x)  Deep brain stimulator;

(xi)  Ventricular peripheral shud;

(xii)  Spinal implants;

(xiii) Automatic impalpable cardiac deflobillator;

(xiv)  Pacemaker (temporary and permanent);

(xv)   Patent ductus arteriosus, atrial septal defect and ventricular septal defect closure device;

(xvi)  Cardiac re-synchronise therapy;

(xvii) Urethra spinicture devices;

(xviii) Sling male or female;

(xix)  Prostate occlusion device; and

(xx)  Urethral stents:

9018 to 9022

Implications of New Cost Audit Rules on CMA’s | ICWAI rule 4

in rule 4, in sub-rule (3), after clause (ii), following clause shall be inserted, namely:- “(iii) which is engaged in generation of electricity for captive consumption through Captive Generating Plant. For this purpose, the term “Captive Generating Plant” shall have the same meaning as assigned in rule 3 of the Electricity Rules, 2005″;

Implications of New Cost Audit Rules on CMA’s | ICWAI rule 6

in rule 6, in sub-rule (1), the following proviso shall be inserted, namely: —

“Provided that before such appointment is made, the written consent of the cost auditor to such appointment, and a certificate from him or it, as provided in sub-rule (1A), shall be obtained”;

In rule 6, after sub-rule (1), the following sub-rule shall be inserted, namely:- “(1A) The cost auditor appointed under sub-rule (1) shall submit a certificate that-

  • the individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act, the Cost and Works Accountants Act, 1959 (23 of 1959) and the rules or regulations made thereunder;
  • the individual or the firm, as the case may be, satisfies the criteria provided in section 141 of the Act, so far as may be applicable;
  • the proposed appointment is within the limits laid down by or under the authority of the Act; and
  • the list of proceedings against the cost auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct”;

(vi) in rule 6, in sub-rule (3), the following provisos shall be inserted, namely: —

“Provided that the cost auditor appointed under these rules may be removed from his office before the expiry of his term, through a board resolution after giving a reasonable opportunity of being heard to the Cost Auditor and recording the reasons for such removal in writing;

Provided further that the Form CRA-2 to be filed with the Central Government for intimating appointment of another cost auditor shall enclose the relevant Board Resolution to the effect;

Provided also that nothing contained in this sub-rule shall prejudice the right of the cost auditor to resign from such office of the company.”;

Implications of New Cost Audit Rules on CMA’s | ICWAI rule 7

(Vii) in rule 6, after sub-rule (3A), following sub-rule shall be inserted, namely:-

“(3B) The cost statements, including other statements to be annexed to the cost audit report, shall be approved by the Board of Directors before they are signed on behalf of the Board by any of the director authorised by the Board, for submission to the cost auditor to report thereon”;

Implications of New Cost Audit Rules on CMA’s | ICWAI rule 8

(viii) in rule 6, for sub-rule (5), the following sub-rule shall be substituted, namely:-

“(5) Every cost auditor shall forward his duly signed report to the Board of Directors of the company within a period of one hundred and eighty days from the closure of the financial year to which the report relates and the Board of Directors shall consider and examine such report, particularly any reservation or qualification contained therein.”;

Implications of New Cost Audit Rules on CMA’s | ICWAI rule 9

(ix) in rule 6, for sub-rule (6), the following sub-rule shall be substituted, namely:-

“(6) Every company covered under these rules shall, within a period of thirty days from the date of receipt of a copy of the cost audit report, furnish the Central Government with such report alongwith full information and explanation on every reservation or qualification contained therein, in Form CRA-4 in Extensible Business Reporting Language format in the manner as specified in the Companies (Filing of Documents and Forms in Extensible Business Reporting language) Rules, 2015 alongwith fees specified in the Companies (Registration Offices and Fees) Rules, 2014.”.

(Amardeep Singh Bhatia)
Joint Secretary to the Government of India

Note.- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub­section (i), vide number G.S.R. 425 (E), dated the 30th June, 2014 and amended vide number G.S.R. 01(E), dated the 31s‘ December, 2014 and vide number G.S.R. 486 (E), Dated the 12th June, 2015.

MCA Notification dt. 14 July 2016 Implications of New Cost Audit Rules on CMA’s Amendment Rules, 2016

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Ptp Cost Audit & Management Audit for CMA

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