There is still confusion in the industry regarding applicability
of Companies (Cost Accounting) Records Rules 2011 . To clear the confusion I would
like to invite attention of all concerned to the clarification given by
Sh.B.B.Goyal , Advisor Cost to the Secretary General, Construction Federation
of India, 1103 ,Antriksh Bhawan, 22,KG Marg, New Delhi -110001 vide Letter No.
52/1/cab/2012 of Ministry of corporate affairs, Cost audit Branch dated 25th
may 2012. ( a copy of the letter reproduced below for your reference)
Salient Features :
1.
All companies engaged in the construction and /
or development (real Estate ) businesses who meet with the threshold limits
laid down in Rule 3 of the Companies (Cost Accouning Recors) Rules ,2011 shall
be required to maintain cost accounting records and file Compliance report with
the Central government .
2.
Companies engaged in construction business as
contractors or subcontractors wherein they are paid only the conversion charges
are exempted from the applicability of companies (Cost accounting Records)
Rules,2011
3.
These Rules do not apply to Non-Corporate
entities (entities which are not registered under companies Act)
4.
No cost
Audit applicable on the companies engaged in the construction and or
development (Real Estate ) Business as on date.
----------------------------------------------------------------------------------------------------------------
Example of Construction Industry
Construction involving
civil and heavy engineering
Industrial and mining
infrastructure
Highways, roads, ports, railways, airports
etc.
Rapid Mass Transport
System,
Water Supply System,
Bulk Material Handling
System,
River Linking Projects,
Sewerage System,
Solid Waste Management
Power systems
Irrigation and agriculture
system
Telecommunication system
Real estate and Property
development
Commercial real estate
Housing, schools,
hospitals, Land and Township Infrastructure Development,
Construction projects
involving specialty trades
Refineries, Chemical
plants, Fertilizer plants including complex and heavy
process plant equipment
Oil and Gas projects
including fabrication of Process Platforms, construction
of sub‐sea and other
pipelines
Floating systems
Power projects
Nuclear Power Plant
Construction
Transmission and distribution lines
Electrical Construction
Construction Project Models:
1
Public Private Partnership (PPP) mode
BOO ‐ Build Own Operate
BOLT ‐ Build Own Lease Transfer
BOOST ‐ Build Own Operate Share Transfer
BOT‐ Build, Operate and Transfer
BOOT‐ Build, Own, Operate and Transfer
BOLT ‐ Build Own Lease
Transfer
BLOT‐ Build, Lease, Operate
and Transfer
DBFO ‐ Design Build Finance
Operate
DBFOT‐ Design, Build,
Finance, Operate and Transfer
EPC‐ Engineering,
Procurement and Construction.
OMT ‐
Operate Maintain Transfer
2
Real Estate Development model
3
EPC (Engineering, Procurement
,Construction)
4. Construction involving in-house fabrication or
manufacturing----------------------------------------------------------------------------------------------------------------
F.NO.52/1/CAB-2012
Government
of India
Ministry of Corporate Affairs
Cost Audit Branch
B-1
Wing,2ND Floor,
Paryavaran
Bhavan,
CGO Complex,
New
Delhi-110003
Dated the 25th May, 2012
To,
The
Secretary General,
Construction
Federation of India,
1103,
Antriksh Bhawan,
22,
K.G.Marg,
New
Delhi-110001
Subject: Exemption
from applicability of Cost Accounting Records Rules to the Construction
Industry.
Sir,
Please refer
your letter dated 23rd March, 2012 on the subject cited.CFI had
earlier made a similar reference on 19th December, 2011 and the
matter was discussed in MCA on 11th January, 2012 with the
representatives of CFI and of few leading construction/development companies
wherein it was observed that all such companies are already maintaining cost
accounting records for their internal requirements. Cost Accounting Records
Rules 2011 do not visualize companies to change their cost accounting system if
already in- place; but they are required to comply with the Generally Accepted
Cost Accounting Principles and Cost Accounting Standards issued by the
institute of Cost Accountants of India, to the extent these are found to be
relevant and applicable and also file compliance report with the Central Government.
It was also observed that existence of structured & verified cost
accounting records would enable the companies to fulfill regulatory requirements;
comply with the Tax Accounting Standards; and assist is their tax assessments.
2. Based on the discussions held,
detailed clarifications were issued on 16th January,2012 that were duly acknowledged by the CFI vide
their letter dated 27th January,2012 and also conveyed to all their
member companies for implementation.
3. However,
the matter has been once again examined in the Ministry and it has been decided
that there appear no reasons for granting any special exemption to the
construction (incl. development or real estate) industry from the applicability
of the Companies (Cost Accounting Records) Rules 2011.Hence the decisions
already conveyed earlier vide letter dated 16th January, 2012 are
being reiterated as under:
a) All
companies engaged in the construction and/or development (real estate)
businesses who meet with the threshold limits laid down in Rule 3 of the
Companies (Cost Accounting Records) Rules, 2011 shall be required to maintain
cost accounting records and file compliance report with the Central Government
in accordance with the provisions of these Rules.
This includes companies undertaking construction jobs with the use of own
materials(whether self manufactured/produced or procured from outside) and /or
development of residential, commercial or industrial estates i.e. development
of township, residential units, commercial complex, office blocks, industrial
parks [including SEZ],etc. or construction of
highways,rails,roads,bridges,industrial & no n-industrial under BOT/BOOT
mode, or the projects undertaken as EPC contractor or the projects undertaken
abroad by a company incorporated in India.
b) As per MCA’s General Circular
No.67/2011 dated 30th November 2011, companies engaged in
construction business as contractors or sub-contractors wherein they paid only
the conversion charges are exempted from the applicability of Companies (Cost
Accounting Records) Rules,2011.
c) Companies (Cost Accounting Records)
Rules, 2011 do not apply to such Joint Ventures that are non-corporate entities
[i.e. not companies registered under the Companies Act] or to unlisted companies
that are below the specified threshold limits or to a body corporate governed
by any special Act.
d) As on date, no cost audit is
applicable on the companies engaged in the construction and/or development
(real estate) business.Hence, these companies are only required to maintain
cost accounting records and file compliance report with the Central Government
that can be signed by their employee cost accountant as defined in Rule 2( c )
of the Companies (Cost Accounting Records) rules,2011.
CMA Krishna Dasan.A
Mob: 98711-28831
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