Reasons Behind MCA Show-Cause Notices for Cost Audit Non-Compliance
The Ministry of Corporate Affairs (MCA) has begun issuing show-cause notices to companies for lapses in cost audit compliance, specifically on the following grounds:
Failure to file the Cost Audit Report when it is applicable.
Delay in filing the Cost Audit Report beyond the prescribed deadline.
What is a Cost Audit?
A cost audit involves examining a company’s cost records and accounts to ensure accuracy, efficiency, and regulatory compliance. This process helps businesses uncover inefficiencies, reduce operational costs, and improve financial management. In India, cost audits are mandatory for certain companies under the Companies Act, 2013, and are overseen by the MCA. Non-compliance can lead to legal action and monetary penalties
Key Cost Audit Forms Under MCA
Understanding cost audit compliance begins with two critical forms:
CRA-2: Notifies the Central Government of the appointment of a cost auditor.
CRA-4: Used to file the Cost Audit Report in XBRL format with the MCA.
Applicability of Cost Audit as per Section 148
Cost audit compliance requirements vary based on the industry sector and financial thresholds. Section 148 of the Companies Act, 2013 outlines the following:
Regulated Sectors (e.g., telecom, electricity, petroleum, pharma, fertilizers, sugar):
Total Turnover (all products/services): ₹50 crore or more
Turnover for Specified Products/Services: ₹25 crore or more
Non-Regulated Sectors (all other companies):
Total Turnover (all products/services): ₹100 crore or more
Turnover for Specified Products/Services: ₹35 crore or more
Cost Audit Compliance Timelines
Companies must adhere to the following deadlines:
Audit Completion: Within 180 days from the end of the financial year (e.g., by September 27, 2025, for FY 2024–25).
Submission to Board: Same as audit completion timeline.
Filing with MCA (CRA-4): Within 30 days from submission to the Board (e.g., if submitted on September 27, the filing deadline is October 26, 2025).
Penalties for Non-Compliance
Failing to comply with cost audit requirements under Section 148 can result in penalties for the company, its officers, and the cost auditor involved.
Compliance Best Practices for Companies
To avoid penalties, companies should:
Appoint cost auditors on time and file CRA-2 without delay.
Ensure timely preparation and filing of CRA-4.
Conduct periodic internal compliance reviews to prevent future lapses
How IndiaFilings Can Help You Stay Compliant
IndiaFilings offers comprehensive support to help you meet MCA cost audit obligations:
CRA-2 Filing Support: Timely intimation of cost auditor appointments.
CRA-4 Preparation & Filing: Full assistance in compiling and submitting cost audit reports in XBRL format.
Response to MCA Notices: Expert help in addressing show-cause notices and resolving compliance issues.
Let IndiaFilings ensure your business remains fully compliant with Section 148 of the Companies Act, 2013. Reach out to our experts for seamless cost audit compliance and professional handling of MCA communications
About the Author
Manisha
Manisha is a seasoned content writer with expertise in business registration, taxation, trademark laws, and corporate compliance. His well-researched articles break down complex legal concepts into simple, actionable insights—empowering entrepreneurs and business owners to confidently manage regulatory and legal requirements.
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