CRA-1 Cost Records for Foreign Companies in India

Introduction: Why Cost Records Matter for Foreign-Backed Manufacturers in India

In 2025, cost compliance is no longer optional — especially for foreign-backed companies in high-impact sectors like electric vehicles (EV), pharmaceuticals, FMCG, and packaging. If your business in India has foreign ownership or foreign direct investment (FDI), the Companies (Cost Records and Audit) Rules, 2014, specifically CRA-1, demand close attention.

Under the Companies Act, 2013, CRA-1 mandates certain classes of companies to maintain detailed cost records — a structured format of capturing cost elements related to production, operations, sales, and services. These records go beyond typical financial statements and offer insights into product-level profitability, internal cost controls, and pricing strategies.

For foreign-controlled entities operating in India, adhering to cost records norms offers multiple advantages:

Regulatory transparency, especially for entities under transfer pricing scrutiny.
Accurate benchmarking for inter-company transactions involving parent companies abroad.
Enhanced decision-making through itemized cost reporting and cost center analysis.
Easier compliance with FEMA, RBI, SEBI, and income tax authorities in India.

With India tightening its regulatory grip on cross-border structures, CRA-1 compliance has now become an important lens through which regulators monitor foreign-backed manufacturers.

💡 2025 Update: The Ministry of Corporate Affairs (MCA) has flagged CRA compliance as a key inspection point during recent ROC and cost audit reviews. Non-maintenance or improper record-keeping under CRA-1 can attract heavy penalties, especially for overseas-controlled manufacturing units.

Applicability of CRA-1 for Foreign-Funded Companies in India

Not every company needs to maintain cost records — but foreign-funded entities in certain high-risk or high-revenue sectors most likely do. Let’s break down how CRA-1 applies in your context.

Which Companies Must Maintain CRA-1 Cost Records?

CRA-1 applies to companies that fall under either of the following categories:

Regulated sectors (telecom, electricity, insurance, etc.)
Non-regulated sectors but meeting certain financial thresholds (see below)
Industries specifically notified under the cost audit rules — including EVs, pharma, FMCG, agro-chemicals, cement, etc.

Key Financial Thresholds (as per Rule 3 of the CRA Rules):

For companies operating in India, cost records become mandatory if:

Net worth is ₹5 crore or more, or
Turnover is ₹35 crore or more in the immediately preceding financial year.

Foreign shareholding (even if indirect) does not exempt your company from cost record maintenance — in fact, it makes you more scrutinized.

Industries Frequently Covered under CRA-1:

The following sectors, especially when foreign-funded, are routinely subject to cost record compliance:

EV Manufacturing (Electric Vehicles and Batteries)
Pharmaceuticals and Biotechnology
Fast-Moving Consumer Goods (FMCG)
Food Processing & Packaged Beverages
Packaging and Paper Products
Chemicals, Plastics, and Paints

Most of these sectors are on the radar due to their FDI inflows, export activities, and inter-company transactions involving foreign affiliates.

Legal Basis:

CRA-1 format is defined under Rule 5 of the Companies (Cost Records and Audit) Rules, 2014, which stems from Section 148 of the Companies Act, 2013.

💬 The rule mandates companies to maintain cost records in a format that “provides particulars relating to utilization of materials or labour or other items of cost.” These must be kept at the registered office or principal place of business in India.

CRA-1 + FDI = Dual Compliance

If your company has FDI (Foreign Direct Investment), CRA-1 compliance must align with:

FEMA 1999 requirements
RBI reporting (FC-GPR, FIRMS portal)
Transfer pricing documentation (Form 3CEB, etc.)

Failure to align CRA-1 data with FDI reporting can lead to red flags during scrutiny from tax or RBI authorities.

Key Industries Impacted: EV, Pharma, FMCG, Packaging & More

As India strengthens compliance under the Companies (Cost Records and Audit) Rules, 2014, foreign-backed companies in sectors like electric vehicles (EVs), pharmaceuticals, FMCG, packaging, and others are facing growing scrutiny. The CRA-1 rules specifically mandate cost record maintenance for these high-impact industries to ensure accountability, compliance, and rational pricing.

EV Industry: Cost Records Crucial for Innovation & Regulation

The electric vehicle sector is booming in India with significant foreign investment from Europe, the USA, and China. However, due to high R&D expenses, government incentives, and subsidy programs, the Ministry of Corporate Affairs (MCA) mandates detailed cost records. CRA-1 compliance ensures that costs linked to innovation, battery sourcing, and import duties are recorded transparently.

Cost records also help in:

Demonstrating value chain efficiency to investors.
Tracking Make in India contributions.
Meeting compliance for Production Linked Incentive (PLI) schemes.

Pharma Sector: Strict CRA-1 Compliance for Drug Pricing Control

India’s pharmaceutical sector is a global hub, exporting to over 200 countries. However, pricing of drugs, especially life-saving medications, is closely monitored by NPPA (National Pharmaceutical Pricing Authority). CRA-1 requires pharma manufacturers to maintain detailed cost sheets for API (Active Pharmaceutical Ingredients), R&D costs, clinical trials, packaging, and logistics.

Why this matters:

Ensures fair pricing in public interest.
Meets transfer pricing norms for foreign investors.
Facilitates cost audit during FDA or EU inspections.

FMCG: Cost Records Help in Margin Management

Foreign-invested FMCG companies in India operate on high volume but low margin models. Cost records under CRA-1 become essential to monitor unit economics, especially in categories like packaged foods, personal care, and household goods.

Typical costs to track:

Raw materials (grains, oils, chemicals)
Labour and packaging
Marketing and warehousing

Packaging: Compliance for Vendors & Exporters

Packaging is an essential vertical supporting both FMCG and pharma. With the surge in eco-friendly packaging investments, foreign companies must maintain cost data for:

Biodegradable raw materials
Customisation for exports
Compliance with plastic waste management rules

Maintaining CRA-1 cost records strengthens investor confidence and ensures cost discipline in a sector that often runs tight on margins.

What Must Be Maintained Under CRA-1: Format & Requirements

If your foreign-invested company in India falls under the applicability criteria of CRA-1, here’s what you need to know about maintaining cost records in 2025. The requirements are outlined under Rule 5 of the Companies (Cost Records and Audit) Rules, 2014, and they are non-negotiable for compliance.

Mandatory Maintenance of Books of Accounts

All companies covered under CRA-1 must maintain cost accounting records in addition to the standard books of accounts under Section 128 of the Companies Act, 2013. These cost records must:

Reflect true cost of production, operations, and sales.
Be maintained in INR, even if the holding is foreign.
Be available in digital or physical format, but easily retrievable during audit or regulatory review.

CRA-1 Format Overview: Part A & Part B

As per CRA-1:

Part A: Includes general information about the company like product details, production capacity, energy consumption, etc.
Part B: Captures quantitative and qualitative cost details – raw materials, consumables, utilities, salaries, R&D, depreciation, and overheads.

Sector-Specific Cost Data Examples

For EV manufacturers:

Lithium-ion battery imports
CKD (Completely Knocked Down) kits
Powertrain assembly labor
Government incentives

For pharma:

API procurement cost
Clinical trial expenses
Regulatory filing charges
Cold-chain logistics

For FMCG/packaging:

Per-unit cost of paperboard or plastics
Transportation and warehousing cost
Advertising and trade discounts

These cost elements must be broken down by product or product group, depending on business scale.

Format, Language & Technology Use

Records must be maintained in English.
Data entries should follow generally accepted cost accounting principles.
Companies may use ERP software with in-built cost modules (like SAP, Tally Prime, Zoho Books) provided they align with CRA-1 format.

Compliance Timeline

Cost records must be updated regularly and kept for at least 8 years. These are then used to prepare the CRA-3 report (if audit is applicable) and submitted through CRA-4 via the MCA portal.

Compliance Challenges for Foreign Entities

Maintaining CRA-1 cost records is not just about ticking a legal checkbox—especially for foreign-funded manufacturers in India. It’s about integrating with the Indian compliance ecosystem while balancing global reporting standards. However, foreign entities face several unique challenges that domestic players may not.

Aligning Global Practices with Indian CRA-1 Requirements

Most multinational or foreign-backed companies follow IFRS or US GAAP for internal accounting. Unfortunately, Indian CRA-1 rules don’t always align neatly. CRA-1 demands cost-specific records in formats and terminologies unfamiliar to foreign teams. This often leads to duplication of effort—maintaining both global reports and India-specific cost ledgers.

Language and Documentation Issues

Indian compliance frameworks expect documentation in English and INR (Indian Rupees), and in formats that comply with Rule 5 of the Companies (Cost Records and Audit) Rules, 2014. This means all manufacturing cost data—from raw material usage to power consumption—must be recorded in prescribed Indian formats. If foreign teams maintain documents in other currencies or languages, this can delay reporting and increase the risk of audit queries.

Legal Framework Differences

Foreign companies often underestimate the breadth of Indian regulatory frameworks like FEMA, Companies Act, 2013, and the Cost Audit Rules. For example, if a US-based pharma company assumes that general ledger entries suffice for compliance, they could inadvertently fall short of CRA-1’s detailed cost structure requirement, triggering penalties.

What’s at Stake: Penalties & Investor Scrutiny

Failure to maintain CRA-1 cost records can result in hefty penalties under Section 148 of the Companies Act. More importantly, it may trigger a cost audit by the government or reduce investor confidence—especially if the foreign parent company is listed or backed by global VCs. Regulatory red flags from Indian ROC (Registrar of Companies) or MCA (Ministry of Corporate Affairs) can have ripple effects across borders.

Need for Local Indian Expertise

Given the complexities of Indian law and the unique format of CRA-1 cost records, it's nearly impossible for foreign entities to remain compliant without local cost accounting professionals. Their involvement ensures correct record formats, timely reporting, and sector-specific cost element documentation.

Role of Cost Accountants and Tech in Cost Record Maintenance

To bridge the gap between international business practices and Indian regulatory requirements, foreign-backed manufacturing companies must adopt a dual strategy: hire certified Indian cost accountants and integrate smart technology tools.

Why Hire Certified Cost Accountants in India?

Certified cost accountants (CMAs) registered with the Institute of Cost Accountants of India (ICAI-CMA) are essential for decoding the CRA-1 format. They understand the nuances of Indian cost reporting—how to record labor costs by process, calculate machine-hour-based depreciation, or allocate overheads in multi-product facilities.

Cost accountants also ensure that foreign companies:

Use correct Part A and Part B formats of CRA-1.
Record material consumption in line with sector benchmarks.
Maintain audit trails required by Indian cost audit rules.
Ensure readiness in case a cost audit (CRA-2/CRA-3) is mandated.

Additionally, for businesses in sensitive sectors like EV manufacturing or pharma, cost accountants also help align Indian cost records with transfer pricing and customs valuation norms, reducing cross-border tax and audit risks.

Leveraging Technology for CRA-1 Compliance

Gone are the days when CRA-1 records were maintained in Excel sheets. Today, most progressive companies are using cloud-based ERP systems integrated with cost modules to automate record-keeping.

Popular ERP systems that support Indian cost accounting needs include:

SAP with Indian localization modules
Oracle ERP Cloud with cost control features
Zoho Books for small to mid-sized enterprises
Tally Prime with CRA-1 compliance extensions

These tools help auto-track:

Material inflow and consumption
Production run times
Employee hours by process
Energy usage per unit output
Packaging and overheads

By linking production, finance, and HR systems, these tools allow real-time recording and auto-generation of CRA-1 formats, which are then verified and signed off by cost accountants.

Monthly & Quarterly Reporting Best Practices

Rather than rushing to prepare cost records annually just before the deadline, foreign-funded companies should adopt monthly or quarterly cost record updates. This ensures:

Accuracy in tracking seasonal manufacturing costs
Timely reconciliation with financial records
Advance preparedness in case of CRA-2 (Cost Audit Report) triggers

Cost accountants can set up automated workflows and internal review protocols, allowing senior management and overseas investors to receive cost snapshots in real-time.

Key Takeaway:
CRA-1 cost record maintenance is not just a legal requirement but a strategic tool for foreign-backed manufacturing companies in India. Working with certified Indian cost accountants and leveraging ERP integrations ensures seamless compliance, cost transparency, and operational efficiency.

If you're a global investor, MNC, or JV partner operating in India’s EV, pharma, FMCG, or packaging sector—partnering with a compliance expert like SSCOIndia is the smartest move in 2025.

How SSCOIndia Helps Foreign Companies Comply with CRA-1

Foreign-backed manufacturing companies entering or scaling up in India often find themselves tangled in regulatory webs — especially when it comes to CRA-1 cost records compliance. That’s where SSCOIndia becomes your most reliable partner.

At SSCOIndia, we understand the unique challenges that multinational corporations face while aligning their cost accounting practices with Indian statutory requirements. Whether you are in EV, pharma, FMCG, or packaging, we help set up a robust system that is CRA-1 compliant and audit-ready.

✅ Cost Records Setup & Systemization

We begin with a detailed review of your operations to map cost centers and reporting structures. Based on your industry and size, we help structure your books of accounts under Rule 5 of CRA-1 — ensuring every cost item, from direct labor to factory overheads, is captured properly.

Our team provides industry-specific templates and guidance for formats like:

Raw material consumption reports
Utilities tracking
Production-based cost allocation
Inventory valuation worksheets

✅ Cost Audit Readiness & Year-Round Support

SSCOIndia helps you avoid the last-minute chaos of audit season. We schedule monthly or quarterly reviews to keep your cost records up to date, allowing easy CRA-2 (auditor appointment) and CRA-3 (cost audit report) filings.

With rising scrutiny from both Indian regulators and foreign investors, proactive compliance gives your company the competitive edge.

✅ CRA-2, CRA-3, CRA-4 Filing Services

Need help with cost audit filings? Our experts handle:

CRA-2: Filing cost auditor appointment with ROC
CRA-3: Submitting the cost audit report accurately
CRA-4: Final electronic filing to MCA

We ensure timely filings, so you avoid late fees, penalties, or disqualification risks.

✅ Cloud-Based Compliance for Overseas Promoters

Worried about access while operating remotely? Our virtual bookkeeping and cloud-based platforms ensure that stakeholders — whether in Europe, China, or the USA — can review compliant cost reports in real time. We also offer support for multi-location or multi-plant setups.

Ready to stay compliant and confident in your Indian operations? SSCOIndia is just a click away.

Conclusion: Stay Audit-Ready and FDI-Compliant in 2025

For foreign-backed manufacturing firms in India, maintaining cost records under CRA-1 is no longer optional — it’s a business necessity. From regulatory mandates to FDI transparency, CRA-1 helps companies gain sharper cost visibility and operational control.

As India tightens cost audit regulations in 2025 and foreign scrutiny increases, global manufacturers in sectors like electric vehicles, pharmaceuticals, and FMCG must stay a step ahead.

To do that, you need:

A deep understanding of Companies (Cost Records and Audit) Rules, 2014
Sector-specific cost formats
Seamless integration with global systems and Indian rules
Regular cost audits and filings

That’s where SSCOIndia steps in — with certified cost accountants, automated tech tools, and years of expertise serving NRI promoters, overseas stakeholders, and foreign-invested entities.

👉 Don’t wait for a compliance notice or audit penalty. Contact SSCOIndia today to get your CRA-1 setup, cost audit, and filing sorted for 2025.

FAQs (Search-Friendly)

✅ Is CRA-1 mandatory for all foreign-owned companies in India?

No, CRA-1 is applicable to companies that fall under specific net worth and turnover criteria and operate in notified sectors like pharma, EV, FMCG, etc. Foreign ownership increases scrutiny but doesn’t by itself trigger CRA-1 applicability.

✅ What sectors are covered under CRA-1 cost records rules?

The major sectors include electric vehicles (EVs), pharmaceuticals, FMCG, petrochemicals, telecom, and packaging. These are notified under Companies (Cost Records and Audit) Rules, 2014.

✅ Can CRA-1 be maintained digitally or on cloud?

Yes, digital maintenance of cost records is allowed as long as the data is structured, audit-traceable, and stored in formats prescribed under Rule 5. SSCOIndia offers cloud-based cost record solutions for foreign promoters.

✅ Who can certify CRA-1 compliance?

Only a practicing cost accountant registered with ICMAI can conduct and certify cost records and file CRA-3 under the Companies Act, 2013.

✅ What’s the penalty for not maintaining cost records in India?

Failure to maintain cost records or non-compliance with CRA-1 rules can lead to penalties up to ₹5 lakh, disqualification of directors, and even prosecution under the Companies Act, 2013.