Cost Audit Compliance 2026: CFOs and Directors Now Face Personal Penalties Under the Corporate Laws Amendment Bill
The Corporate Laws Amendment Bill 2026 proposes direct personal liability for CFOs and MDs at companies required to maintain cost records under Section 148 of the Companies Act 2013. With the CRA-2 cost auditor appointment deadline approaching in September 2026, regulated-industry companies need to act now. The Bill has been referred to a Joint Parliamentary Committee and has not yet received Presidential assent.
CA Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Legal basis: Section 148 and Section 147, Companies Act 2013; Rules 3–6, Companies (Cost Records and Audit) Rules 2014 — Effective: ongoing. Proposed personal liability provisions under Corporate Laws Amendment Bill 2026 (Bill No. 85 of 2026, referred to JPC — not yet in force). Source: mca.gov.in. Last reviewed by CA Harun Raaj: August 2026.
The Corporate Laws Amendment Bill 2026 marks a watershed shift in how cost audit compliance is treated in India. For the first time, Chief Financial Officers, Managing Directors, and Whole-Time Directors at companies required to maintain cost records face direct personal financial liability — separate from corporate penalties — for non-compliance with Section 148 of the Companies Act 2013.
Note: As at the date of this article, the Corporate Laws Amendment Bill 2026 (Bill No. 85 of 2026, introduced in Lok Sabha on 23 March 2026) has been referred to a Joint Parliamentary Committee and has not yet received Presidential assent. The proposed penalty provisions are not yet in force. The existing Section 148 read with Section 147 of the Companies Act 2013 continues to apply until assent and Gazette notification.
With the CRA-2 deadline (cost auditor appointment) approaching in late September 2026 for March 31 financial year-end companies, this is the moment to get cost audit governance right.
Key point: Under the proposed Corporate Laws Amendment Bill 2026, CFOs and MDs at listed companies face a personal penalty of ₹5,00,000 for failure to maintain cost records — proposed, not yet in force, pending Presidential assent.
Which Companies Must Maintain Cost Records and Appoint a Cost Auditor?
The Companies (Cost Records and Audit) Rules 2014 specify two categories:
Table A — Regulated Industries (Rule 3): Companies in sectors including pharmaceuticals, petrochemicals, chemicals, fertilisers, sugar, textiles, paper, and steel must:
- Maintain cost records if overall company turnover exceeds ₹35 crore in the immediately preceding financial year.
- Appoint a cost auditor (CRA-2) if overall company turnover exceeds ₹50 crore AND the aggregate turnover of the regulated product/service exceeds ₹25 crore — both conditions must be met.
Table B — Other CETA-Listed Products (Rule 3): Companies manufacturing products listed under the Central Excise Tariff Act but not in Table A must:
- Maintain cost records and appoint a cost auditor (CRA-2) if overall company turnover exceeds ₹100 crore AND the aggregate turnover of the relevant product/service exceeds ₹35 crore — both conditions must be met.
Source: Rules 3 and 4, Companies (Cost Records and Audit) Rules 2014, Ministry of Corporate Affairs — mca.gov.in.
Note on exemptions: Certain high-export and SEZ-operating companies may be exempt from cost audit requirements. Verify applicability for your specific company from mca.gov.in or a qualified cost accountant.
What the Corporate Laws Amendment Bill 2026 Proposes
1. Direct CFO Liability — Proposed Section 148(8)
The Bill proposes making the MD, WTD (Finance), CFO, or any other Board-designated officer personally liable for failure to maintain cost records:
The Board must formally designate — by Board resolution — which senior officer bears this responsibility, creating a documented accountability trail.
2. Procedural Defaults — Proposed Section 148(9)
Failure to appoint a cost auditor, furnish required information, or meet procedural requirements:
- Initial penalty: ₹10,000 per entity or officer
- Continuing penalty: ₹100 per day of non-compliance
- Cap: ₹2,00,000 (company) and ₹50,000 (officers)
3. Mandatory Cost Accounting Standards — Proposed Section 148(1A)
The Central Government will prescribe Cost Accounting Standards (CAS) in consultation with ICMAI. Companies must comply — moving cost accounting from a judgment-based exercise to a structured, standard-compliant process.
4. Multi-Disciplinary Firms Permitted — Amended Section 148(3)
Firms where the majority of partners are cost accountants registered with ICMAI can now be appointed as cost auditors, expanding the pool of eligible auditors.
Key CRA Deadlines for FY 2025-26
Verify the exact timelines from mca.gov.in and the Companies (Cost Records and Audit) Rules 2014 as currently in force.
Illustrative Example
The following is an illustrative example only — not a real company.
Ratan Pharma Pvt Ltd is a Hyderabad-based pharmaceutical manufacturer with annual company turnover of ₹120 crore and product-level turnover of ₹90 crore. As a Table A industry company above both the ₹50 crore company threshold and the ₹25 crore product threshold, it must:
- Appoint a cost auditor via CRA-2 by approximately 30 September 2026
- Maintain cost records per prescribed Cost Accounting Standards
- Pass a Board resolution formally designating its CFO as the officer responsible for cost records compliance
Under the proposed Bill, if CRA-2 is not filed on time, both the company (₹10,000 initial + ₹100/day) and the CFO personally (same rate) face penalties under proposed Section 148(9). If cost records are not maintained at all, the company and CFO face the additional Section 148(8) personal penalty.
See Also
Frequently Asked Questions
Is the Corporate Laws Amendment Bill 2026 already in force?+
No. The Bill (No. 85 of 2026) was introduced in Lok Sabha on 23 March 2026 and has been referred to a Joint Parliamentary Committee. It has not received Presidential assent. Until assent and Gazette notification, the existing Companies Act 2013 Section 148 with penalties under Section 147 applies.
What is the CRA-2 deadline for FY 2025-26?+
Under Rule 6(2) of the Companies (Cost Records and Audit) Rules 2014, CRA-2 must be filed within 180 days of the financial year end — approximately 30 September 2026 for March 31 FY-end companies. Verify the exact date from mca.gov.in.
Does cost audit apply to service companies?+
Cost records and cost audit under the 2014 Rules apply to companies engaged in production, processing, manufacturing, or mining of specified products. Pure service companies are generally not covered — confirm your classification with a cost accountant.
We are a pharma company with turnover of Rs 120 crore but product sales of only Rs 20 crore. Do we need a cost auditor?+
Likely no. For Table A cost audit, both thresholds must be met: company turnover above Rs 50 crore AND product aggregate above Rs 25 crore. If your pharma product turnover is below Rs 25 crore, cost audit is not triggered — verify with a cost accountant.
What happens if we miss the CRA-2 deadline?+
Under existing law (Section 148 read with Section 147), the company and its officers face penalty. If the Amendment Bill is enacted, the CFO personally faces additional penalties under proposed Section 148(9) for procedural defaults.
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