Chirag Ltd. has achieved a turnover ₹30 crore for the year ended 31st March, 2024. The Chief Operating Officer (COO) of the company is in a dilemma of cost audit would be applicable on the basis of turnover. You are a co

Rule 4 of Companies (Cost Records and Audit) Rules, 2014 provides for applicability of cost audit. Accordingly, Every company specified in item (A) of rule 3 of Companies (Cost Records and Audit) Rules, 2014 i.e. regulated sectors shall get its cost records audited in accordance with these rules if the overall annual turnover of the company from all its products and services during the immediately preceding financial year is rupees fifty crore or more and the aggregate turnover of the individual product or products or services for which cost records are required to be made under rule 3 is rupees twenty five crore or more. Every company specified in item (B) of rule 3 of Companies (Cost Records and Audit) Rules, 2014 i.e. non-regulated sectors shall get its cost records audited in accordance with these rules if the overall annual turnover of the company from all its products and services during the immediately preceding financial year is rupees one hundred crore or more and the aggregate turnover of the individual product or products or service or services for which cost records are required to be made under rule 3 is rupees thirty five crore or more. The requirement of cost audit under these rules shall not apply to a company which is covered in rule 3, and whose revenue from exports in foreign exchange exceeds seventy five percent of its total revenue; or which is operating from a SEZ. which is engaged in generation of electricity for captive consumption through captive generating plant. In the given case, the turnover of Chirag Ltd. is ₹30 Crore. The company is advised that if the company operates in regulated sector, and the aggregate turnover of the individual product(s) / service(s) is ₹25 crores or more, then, cost audit will be applicable. If it operates in non-regulated sector, cost audit is not applicable, as the turnover of the company does not meet the criteria prescribed in the Rules.