Introduction: Cost Audit in the FMCG Sector – More Relevant Than Ever in 2025
In 2025, cost audit in the FMCG (Fast-Moving Consumer Goods) sector is not just a compliance formality — it’s a critical business imperative. With India’s FMCG market projected to cross INR 8 trillion, regulatory scrutiny is becoming sharper, especially in areas like manufacturing efficiency, pricing transparency, and inventory control. Cost audits now go beyond validating numbers — they help FMCG brands optimize operations, improve product profitability, and prepare for future growth.
The Companies Act, 2013, along with the Companies (Cost Records and Audit) Rules, 2014, makes it mandatory for certain FMCG companies to maintain cost records and get them audited. With the Ministry of Corporate Affairs (MCA) focusing on sectors dealing with daily-use essentials like soaps, hair oil, biscuits, packaged foods, and detergents, cost audit compliance in 2025 is under the spotlight like never before.
Whether you're a manufacturer of chocolates or cleaning liquids, the cost audit is your gateway to uncovering hidden inefficiencies and ensuring financial and operational discipline. The cost audit checklist is no longer optional — it's an essential toolkit for staying compliant and competitive.
2. Applicability of Cost Audit for FMCG Companies under the Companies Act, 2013
The Companies (Cost Records and Audit) Rules, 2014 lay down clear guidelines on which FMCG companies must comply with cost audit requirements. Here’s how the applicability works in 2025:
✅ Industry Classification under Rule 3 & Rule 4
FMCG products like packaged foods, soaps, shampoos, beverages, cosmetics, and cleaning supplies fall under regulated and non-regulated sectors depending on their nature. Most of them fall under Rule 3’s purview, where maintaining cost records is mandatory, and Rule 4, where cost audit is required once thresholds are breached.
✅ Threshold Criteria for Cost Audit Applicability in 2025:
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Turnover exceeds INR 100 crores, and the company is operating in a specified product category
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Overall revenue from regulated or specified non-regulated goods/services is INR 25 crores or more
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The company is not a foreign company, micro enterprise, or dormant company
This means if you're an FMCG company manufacturing say biscuits, toothpaste, soft drinks, or personal hygiene items, and your turnover crosses the limits mentioned above — you must file CRA-2 (appointment of cost auditor) and subsequently CRA-3 (cost audit report) and CRA-4 (filing with MCA).
✅ Product Categories Under FMCG That Trigger Cost Audit:
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Personal care: soaps, face washes, shampoos, hair oils
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Food & beverages: biscuits, chocolates, ready-to-eat meals, juices
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Home care: detergents, disinfectants, air fresheners
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Packaged consumer goods: sanitary napkins, shaving creams, deodorants
The fast-paced nature of FMCG operations makes it more prone to wastage, overproduction, margin leakage, and cost distortion — issues that cost audit can identify and rectify.
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Top Compliance Requirements FMCG Companies Must Meet in 2025
As we step into FY 2025, FMCG companies in India are under increased pressure to meet cost audit compliance requirements set forth by the Companies (Cost Records and Audit) Rules, 2014, issued under the Companies Act, 2013. The Ministry of Corporate Affairs (MCA) has been particularly stringent with product-heavy and fast-moving industries, and FMCG sits at the heart of that focus.
If your company manufactures or trades in products like biscuits, soaps, hair oil, packaged foods, detergents, or cosmetics, these are regulated under Rule 3 of the Cost Audit Rules, which mandates cost audit under specific thresholds.
Let’s break down the essential cost audit compliance requirements for FMCG companies in 2025:
a) Maintaining Cost Records under CRA-1
Every FMCG company meeting the threshold criteria must maintain detailed product-wise cost records as prescribed in CRA-1 format. These records must include:
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Material consumption
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Labor costs
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Overheads (factory, admin, marketing)
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Utilities and R&D expenses
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Cost of goods sold (COGS)
With inflationary trends and margin pressures, this granular breakdown also aids internal cost control.
b) Appointment of Cost Auditor – CRA-2 Filing
Under Rule 6(2), eligible companies must appoint a cost auditor within 180 days of the financial year’s start, i.e., by September 27th, 2025 for FY 2025-26. The appointment must be filed in Form CRA-2 with the MCA, failing which penalties apply.
Make sure to:
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Get board approval for appointment
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Choose a qualified cost accountant
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File CRA-2 on the MCA portal
c) Preparing & Filing Cost Audit Report – CRA-3
The cost auditor prepares a detailed report in CRA-3, which must align with CRA-1 records. For FMCG firms with multiple SKUs, product classification and cost allocation accuracy are critical. The cost audit report must cover:
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Unit-wise and product-wise profitability
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Capacity utilization
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Margin analysis
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Related party transactions
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Notes on abnormalities and inefficiencies
d) Filing CRA-4 on MCA Portal
Once the CRA-3 is signed off, the company must file CRA-4 electronically within 30 days of board approval, typically by October or November. CRA-4 must be digitally signed and uploaded on the MCA21 portal.
Ensure:
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Correct mapping of financial and cost records
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Proper auditor qualifications
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Complete attachments (balance sheet, P&L, etc.)
Missing these timelines could mean financial penalties, reputational damage, and legal scrutiny.
Risks of Ignoring Cost Audit: Penalties, Reputational Damage & More
Many FMCG companies still view cost audit as a checkbox activity. But ignoring it in 2025 can result in serious financial, operational, and reputational risks.
a) Penalty Provisions Under Companies Act
According to Section 148 of the Companies Act, 2013:
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Non-appointment of a cost auditor can attract a fine up to ₹50,000.
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For incorrect or non-filing of CRA-2, CRA-3, or CRA-4, companies may face ₹100,000 or more, plus a daily fine for continuing default.
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Auditors themselves can be fined for non-compliance or false certification.
These penalties aren’t just monetary—they reflect poorly on corporate governance and increase MCA surveillance.
b) Negative Impact on Funding, IPOs & M&A
Investors, PE firms, and public market regulators now require compliance-grade cost records before committing funds. If you’re planning:
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An IPO in 2025-26
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A private equity round
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A merger or acquisition
Any gap in cost audit compliance can delay the deal, lower your valuation, or even disqualify your application.
c) Regulatory Scrutiny from MCA, SEBI, or CCI
FMCG is a high-visibility sector. Regulators like the MCA, SEBI, and Competition Commission of India (CCI) monitor:
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Pricing practices
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Input subsidies
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Promotional expenses
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Transfer pricing & related party transactions
Non-compliant cost audit reports raise red flags and can lead to full-fledged investigations.
d) Loss of Competitive Edge
Cost audit isn’t just a burden—it’s a strategic tool. By skipping it:
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You miss insights into product-line profitability
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Overlook loss-making SKUs
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Fail to optimize resource allocation
In a market where even 1% margin matters, this is an unforced error.
e) Exposure to Audit Trail Failures
Under Section 143 of Companies Act, all statutory auditors must verify cost audit compliance. In the era of digital audit trails and MCA cross-validation, any mismatch or absence of cost audit filing can:
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Trigger suspicion
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Lead to ROC notices
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Affect director disqualifications
Final Thoughts for These Sections
If you’re part of the FMCG industry in India, 2025 is not the year to take cost audit lightly. From regulatory risks to investor credibility, cost audit touches every key business function. And now, with technology-driven audit systems in place, compliance is no longer optional—it’s a strategic imperative.
Up next: we’ll explore sector-specific audit best practices and how SSCOIndia can simplify the entire process—from CRA-1 to CRA-4—with tailor-made FMCG cost audit solutions.
Stay audit-ready. Stay ahead.
How Cost Audit Helps FMCG Businesses Beyond Compliance
In the dynamic world of Fast-Moving Consumer Goods (FMCG), staying ahead isn’t just about catchy advertising or deep retail distribution. It’s about maintaining tight control over costs while delivering quality at scale. This is exactly where cost audit for FMCG companies becomes a game-changer — not just for regulatory compliance, but also for smarter decision-making and higher profitability.
Control Over Raw Material and Packaging Costs
Raw material and packaging form a major portion of any FMCG company’s cost structure. With frequent fluctuations in commodity prices (like palm oil, plastic, and cardboard), even minor inefficiencies can impact margins heavily. A cost audit helps businesses:
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Track exact raw material usage per unit
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Identify waste or overconsumption
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Benchmark input costs across plants or vendors
By analyzing cost records under CRA-1 format, FMCG companies can reduce unnecessary procurement and reallocate resources more efficiently.
Identifying Wastage in Production or Logistics
Shrinkage and wastage are silent killers in the FMCG supply chain. Whether it’s spoilage during transit or overproduction of slow-moving SKUs, a detailed cost audit helps pinpoint inefficiencies:
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Evaluate yield variances in manufacturing
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Quantify logistics costs vs. output
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Detect pilferage or redundant storage costs
With this data, business leaders can reduce avoidable losses, especially when products have short shelf lives (like snacks, dairy, or cosmetics).
Profitability Analysis by SKU, Brand, or Geography
Not all products are equal — some might be volume drivers but low-margin, while others might be niche but high-profit. A cost audit enables precise profitability tracking by:
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SKU-level cost sheet analysis
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Brand-wise contribution tracking
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Region-wise cost center reporting
This allows FMCG companies to rationalize product portfolios and drop loss-making combinations.
Strategic Pricing Decisions
Pricing is the heartbeat of FMCG strategy. Yet, many companies still base price changes on market sentiment rather than cost logic. Cost audit data reveals:
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Cost build-up per unit including direct and indirect costs
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Scope for margin improvement via re-engineering or vendor shift
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Price sensitivity zones across territories
This empowers marketing and finance teams to launch pricing strategies backed by data, not guesswork.
✅ Pro Tip: Want to know which of your products is bleeding margins silently? A CRA-compliant cost audit might just uncover it.
Sector-Specific Focus: What FMCG Companies Should Watch in 2025
As the FMCG sector grows more complex and regulated in 2025, cost audit isn’t just about filing a report — it’s about adapting to sector-specific challenges and staying audit-ready all year round.
Costing Challenges in Multi-Brand, Multi-Location Setups
A typical FMCG company today might manufacture biscuits, shampoos, and dishwashing bars — all from different plants, using different raw materials and labour mixes. Managing cost records in such environments needs:
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Separate cost sheets per product group
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Inter-unit transfer pricing documentation
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Allocation of shared costs like utilities or warehousing
A cost audit ensures that each product is correctly costed, and that cost leakages at any unit are flagged promptly.
R&D and Marketing Cost Allocations
With product innovation being the lifeblood of FMCG growth, companies often pour crores into R&D, branding, and customer acquisition. But improper cost allocation can misstate the real profitability of new products.
Cost auditors ensure:
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R&D expenses are capitalized or amortized appropriately
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Marketing spends are fairly distributed among products
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Ad campaign ROIs are linked with actual sales uplift
This brings financial clarity to creative and innovation-led decisions.
New Compliance Issues: Sustainability, ESG, and EPR
In 2025, FMCG companies face tighter scrutiny under ESG norms (Environmental, Social, Governance) and Extended Producer Responsibility (EPR) for plastic packaging. These affect cost structure and disclosures.
Cost audits now also review:
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Cost of sustainable packaging alternatives
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Investments in waste management systems
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Penalties avoided due to EPR compliance
Integrating these into cost records not only keeps your company compliant but also prepares you for green reporting frameworks increasingly expected by investors and regulators.
Fast-Moving Inventory: Impact on Stock Audit & Cost Records
FMCG inventory moves fast — and sometimes unpredictably. Perishable goods, seasonal demand spikes, and rapid price wars make real-time inventory tracking a must.
A cost audit here helps:
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Align stock audit records with cost records
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Flag mismatches in closing stock valuations
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Detect buffer stock inefficiencies or under-stocking risks
This leads to more accurate Cost of Goods Sold (COGS) calculations and better working capital management.
⚠️ Note: Any mismatch in stock records and cost records is now a red flag during CRA-3 scrutiny and may attract queries from MCA.
Real-World Examples: Cost Audit Gaps Found in FMCG Firms
Even the most well-managed FMCG companies in India can stumble when it comes to cost audit compliance. In 2024 alone, several well-known mid-sized manufacturers of packaged food, cosmetics, and personal care products were flagged during cost audits for glaring gaps.
A common red flag is the mismatch between cost records and financial statements. For instance, a Delhi-based biscuit manufacturer showed inflated administrative costs in its financial books, while the corresponding CRA-1 cost records recorded significantly lower values. This inconsistency triggered questions from the Ministry of Corporate Affairs (MCA) and delayed the company’s credit rating process.
Another issue is the misclassification of marketing expenses as production overheads. FMCG brands often run massive promotional campaigns, and when such costs are incorrectly allocated to the production department, it distorts the actual cost of goods sold (COGS). This misreporting not only violates cost audit principles but also weakens internal profitability analysis.
Further, many cost audits uncover underreporting of by-product and scrap sale revenue. For example, a prominent detergent company in Gujarat was found to be undervaluing scrap plastic packaging waste, which was sold to recyclers. Such misreporting not only breaches the Companies Act rules but also affects sustainability disclosures.
These real-world lapses underline the importance of a professional, industry-aware cost audit, especially in the FMCG sector where scale and speed often lead to record-keeping errors.
How SSCOIndia Empowers FMCG Companies with End-to-End Cost Audit Support
At SSCOIndia, we specialize in industry-specific cost audit solutions that go beyond just ticking regulatory boxes. Our expertise lies in tailoring every audit process to the unique cost structure and operational complexity of FMCG companies.
We assist FMCG businesses in managing the entire CRA-1 to CRA-4 compliance lifecycle:
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Setting up and maintaining structured cost records as per CRA-1
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Timely CRA-2 filings to ensure proper appointment of cost auditors
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Drafting and verifying data-driven CRA-3 cost audit reports
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Seamless e-filing of CRA-4 via the MCA portal, with error-free XBRL tagging
SSCOIndia provides industry-specific templates and SOPs for different FMCG verticals—whether you're in food & beverages, personal care, or cleaning products. These tools help reduce compliance risks while improving audit readiness.
To reduce cost record inconsistencies, our consultants conduct internal cost hygiene checks quarterly. We cross-check vendor costs, production overheads, and promotional spend allocations to ensure CRA-1 compliance.
For decision-makers, we prepare MIS reports and cost trend dashboards that offer insights like:
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Raw material cost variation per SKU
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Brand-wise contribution margin
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Packaging cost breakdowns by plant or geography
When you work with SSCOIndia, you’re not just getting a compliance partner—you’re gaining a strategic ally for cost optimization and profitability improvement.
Explore how we help FMCG brands thrive: GST Calculator Tool
Conclusion: Don’t Risk Non-Compliance – Make Cost Audit Your Competitive Advantage in 2025
For FMCG companies in India, cost audit is no longer optional—it’s essential. With growing pressure from regulators, consumers, and investors, ensuring accurate cost records and timely cost audit filings can make or break your business reputation.
From avoiding hefty penalties to identifying cost leakages across the supply chain, a well-executed cost audit offers more than just statutory benefits—it enables smarter, data-backed decisions.
SSCOIndia’s specialized cost audit services for FMCG companies ensure:
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Full compliance with Companies Act & Cost Audit Rules, 2014
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Clean, structured cost records for every audit cycle
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Strategic insights to boost brand profitability
👉 Don’t wait for a notice from MCA or SEBI. Act now. Contact SSCOIndia for expert cost audit support tailored for your FMCG business in 2025.
📞 Book a free consultation with our audit experts: https://sscoindia.com/contact-us
FAQs
Q1: Is cost audit mandatory for small FMCG companies?
If your company exceeds the turnover threshold specified under the Cost Audit Rules (typically ₹100 crore for regulated sectors and ₹50 crore for non-regulated sectors), cost audit becomes mandatory—even if you're a small brand in the FMCG space.
Q2: What’s the deadline for CRA-2 & CRA-3 in 2025?
CRA-2 (Cost Auditor Appointment) must be filed within 180 days from the start of the financial year (i.e., by 27th September 2025 for FY 2024-25). CRA-3 (Cost Audit Report) must be filed within 180 days of the financial year end—i.e., by 27th September 2025.
Q3: Can one cost auditor handle multiple FMCG brands?
Yes, if the brands are operated under the same legal entity. However, the cost auditor must clearly report brand-wise profitability and costing, especially in CRA-3 Part D.
Q4: Do export-focused FMCG units need separate audit treatment?
Export units are not exempt from cost audit. In fact, regulatory bodies often review export subsidies and costs closely, making accurate cost reporting even more critical.
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