The Government has amended all the existing Cost Accounting Records Rules under Section 209 (1) (d) of the Companies Act, 1956, requiring the prescribed industries to maintain proper cost records in respect of defined inter-company transactions. The Rules have significant importance for the Department of Company Affairs (DCA) as the same are also linked to investor’s protection by ensuring against shifting of profits between corporate units to the detriment of ordinary investor at large. Substantial amount of additional revenue by way of duties and taxes may also be generated by proper valuation of inter-company transactions between the related parties, if proper records as prescribed under these Rules are maintained.

        Pricing is central to international trade under the liberalized economy. Normally, no inter-company transfer should take place below cost. Therefore, it is imperative that the respective Cost Accounting Records Rules should contain uniformly appropriate provisions requiring maintenance of cost records in all such cases.

        To keep pace with changing global economic trend and to identify and focus on the areas relevant to the current requirements of various interests involved, some of the existing Cost Accounting Records Rules relating to Bulk Drugs, Formulations, Aluminum, Vanaspati and Milk Food have also been simplified and rationalized. During the revision, the Rules in respect of Infant Milk Food have been merged with the Rules relating to Milk Food. In some of the Cost Accounting Records Rules, the scope of applicability clause has been widened. These new Rules are more purposeful, comprehensive and user friendly.

        The DCA is also currently engaged in the process of formulating Cost Accounting Records Rules in respect of such core sectors, which are covered or likely to be covered under some regulatory mechanism. These Rules shall cover strategic sectors like Power, Telecommunication, Petroleum Products etc. and will be notified in the near future.

        The Cost Audit Reports are extensively used by the various Government agencies, revenue authorities, regulatory bodies and other institutions. Director General of Investigation and Registration (DGIR) has relied on these Reports as evidence in pursuit of cases with MRTP Commission. There is a great role of Cost Audit Reports particularly in the management and administration of Anti-Dumping Laws and Competition Laws. Cost Audit Reports can also help the Industry in cases related to dumping of goods and services by the dominant manufacturers to eliminate domestic competition. In fact, Competition Law to be effective against any unfair competition activity, pre-supposes the availability of reliable and authenticated cost data.

        The Central Government has been prescribing Cost Accounting Records Rules from time to time for various industries in exercise of the powers conferred under Section 642(1) read with Section 209(1) (d) of the Companies Act, 1956. Cost Accounting Records Rules have so far been prescribed in respect of 43 industries. The companies, which are covered by the Cost Accounting Records Rules, are required to maintain the cost data in the manner prescribed under these Rules.