Cost Accounting Standards in India: The 25 Standards Every Manufacturer Should Know

India now has 25 Cost Accounting Standards — and they bind more manufacturers than most promoters realise.

Most manufacturers first hear the phrase "Cost Accounting Standards" when a notice arrives, a customer's procurement team asks for a cost certificate, or a GST officer questions the value declared on a stock transfer to a sister unit. By then, the records that should have supported the answer were needed three years ago.

Cost Accounting Standards — CAS — are not an academic subject. They are the measurement rules that decide what a rupee of cost actually means in your books, and Indian law has quietly made them binding in more places than most promoters realise.

This post sets out all 25 standards, explains which ones do the heavy lifting in day-to-day practice, and identifies exactly where they carry statutory force.

What CAS are, and who issues them

The Cost Accounting Standards Board (CASB) of the Institute of Cost Accountants of India issues the CAS. Their purpose is narrow and useful: to make sure that two companies computing the "cost of production" of the same product arrive at figures that mean the same thing.

Financial statements and cost records answer different questions from the same underlying data.

Financial accounting standards (Ind AS / AS) tell you how to present results to shareholders and lenders. Cost Accounting Standards tell you how to measure and assign cost to a product, service, or cost centre. The two answer different questions, and a company can comply fully with Ind AS while its cost records remain indefensible.

Alongside the standards, the CASB has issued the Generally Accepted Cost Accounting Principles (GACAP) and 13 Guidance Notes that deal with application in specific situations.

The complete list of 25 Cost Accounting Standards

CAS	Title	What it governs
CAS-1	Classification of Cost	Direct/indirect, fixed/variable, and the cost object framework
CAS-2	Capacity Determination	Installed, practical, normal and actual capacity
CAS-3	Production and Operation Overheads	Identification, measurement and assignment of factory overheads
CAS-4	Cost of Production / Acquisition / Supply of Goods / Provision of Services	Valuation basis for captive and related-party supply
CAS-5	Determination of Average (Equalized) Cost of Transportation	Freight equalisation and inward/outward transport cost
CAS-6	Material Cost	Purchase price, duties, discounts, wastage and issue pricing
CAS-7	Employee Cost	Wages, benefits, gratuity, idle time and separation costs
CAS-8	Cost of Utilities	Power, steam, water, compressed air — own generated and purchased
CAS-9	Packing Material Cost	Primary and secondary packing, reusable packing
CAS-10	Direct Expenses	Job-specific expenses traceable to a cost object
CAS-11	Administrative Overheads	Corporate and administrative cost and its assignment
CAS-12	Repairs and Maintenance Cost	Routine, preventive and major overhaul cost
CAS-13	Cost of Service Cost Centre	Inter-service allocation between support departments
CAS-14	Pollution Control Cost	Effluent treatment, emission control, waste disposal
CAS-15	Selling and Distribution Overheads	Marketing, distribution, warehousing and after-sales cost
CAS-16	Depreciation and Amortisation	Depreciation basis for cost statements
CAS-17	Interest and Financing Charges	Which finance costs enter cost, and which do not
CAS-18	Research and Development Costs	Product/process development and its recovery
CAS-19	Joint Costs	Split-off point, joint and by-product costing
CAS-20	Royalty and Technical Know-how Fee	Treatment of licence, royalty and know-how payments
CAS-21	Quality Control	Inspection, testing and quality assurance cost
CAS-22	Manufacturing Cost	Build-up of total manufacturing cost
CAS-23	Overburden Removal Cost	Mining and extractive industry stripping cost
CAS-24	Treatment of Revenue in Cost Statements	Revenue recognition and reconciliation in cost statements
CAS-25	Valuation of Inventory	Measurement basis for inventory in cost statements

A Limited Revision in 2017, prompted by the transition to Ind AS, amended CAS 6, 7, 8, 9, 10, 11, 12, 13, 14, 16, 17, 20, 21, 22, 23 and 24 with effect from cost statements prepared on or after 1 April 2017. If your internal cost manual predates that revision, it is out of date.

The newest standard: CAS-25 on Valuation of Inventory

The Council of the Institute issued CAS-25, Valuation of Inventory, effective 12 February 2026, for application in the preparation and certification of cost accounting statements. A separate clarification on the standard has since been issued by the Council.

Under CAS-25, what sits on these racks has to be measured on a defined basis — not whatever the ERP defaulted to.

The timing matters. Section 142(2A) of the Income-tax Act allows an assessing officer to direct an inventory valuation exercise by a Cost Accountant, and ICDS-II governs inventory measurement for tax purposes. CAS-25 gives that work a defined measurement framework. For manufacturers carrying significant WIP, by-products, or slow-moving stores, this is the standard most likely to be tested in the current assessment cycle.

Where CAS actually carry legal force

This is the part that most often surprises management.

1. Cost records under the Companies Act, 2013. Rule 5 of the Companies (Cost Records and Audit) Rules, 2014 requires specified companies to maintain cost records in Form CRA-1 — and CRA-1 expressly requires that those records follow the Cost Accounting Standards and GACAP issued by ICMAI. Maintenance is triggered at a turnover of ₹35 crore in the immediately preceding financial year for companies covered under the Rules; cost audit thresholds are higher and depend on whether your product falls in the regulated (Table A) or non-regulated (Table B) sector. Adherence to CAS is not optional for these companies — it is the prescribed basis of the record itself.

2. GST valuation. Where there is no comparable open-market value, Rule 30 of the CGST Rules read with Section 15(4) permits valuation at 110% of cost of production or manufacture. CAS-4 is the accepted basis for arriving at that cost. This governs stock transfers between distinct persons, related-party supplies, and free-of-cost supplies — a routine exposure for any manufacturer with more than one GST registration.

3. Government incentive and subsidy claims. Cost-based claims under state industrial policies and central schemes are almost always supported by a Cost Accountant's certificate. A certificate is only as strong as the cost records behind it.

4. Anti-dumping, regulatory tariff and cost-plus contracts. DGTR proceedings, regulated-sector tariff determination and government cost-plus supply contracts all work from CAS-based cost construction.

CAS is not the same as Cost Auditing Standards

The two families are routinely confused. The Cost Auditing & Assurance Standards (CAAS 101 to 104), issued under Section 148(3) of the Companies Act, are mandatory for the conduct of a cost audit:

• CAAS-101 — Planning an Audit of Cost Statements

• CAAS-102 — Cost Audit Documentation

• CAAS-103 — Overall Objectives of the Independent Cost Auditor

• CAAS-104 — Knowledge of Business, its Processes and Business Environment

CAS tell you how cost is measured. CAAS tell the auditor how the audit is performed. A company can only be assessed against the first; the auditor is bound by both.

A practical checklist for manufacturing MSMEs

Normal capacity determination under CAS-2 decides how much of that idle bay's fixed cost lands on the product you did make.

If you manufacture in India and your turnover is approaching ₹35 crore, work through these before your next year-end:

• Confirm whether your product or service appears in Table A or Table B of the Rules — CETA headings matter, and the classification decides both the maintenance and the audit trigger.

• Check that your ERP cost module produces output aligned to CRA-1 formats, not just to the P&L.

• Review your normal capacity determination under CAS-2. Under-absorption of fixed overhead due to a wrongly stated normal capacity is the single most common finding in a first cost audit.

• Verify that inter-unit and related-party supplies are supported by a CAS-4 working, refreshed annually.

• Reconcile cost records to audited financials under CAS-24. An unexplained reconciliation gap is what invites questions.

• Revisit your inventory valuation basis in light of CAS-25 and Income Computation and Disclosure Standard on Valuation of Inventories (ICDS-II).

Getting it right before it is tested

Cost records built in the year the notice arrives are rarely convincing. Built continuously and to standard, they do something more useful than satisfy a regulator — they tell you which products actually make money, which capacity you are paying for and not using, and where your overhead is really going.

D P Jadhav & Co., Cost & Management Accountants advises manufacturing MSMEs across India on cost records design, statutory cost audit under Section 148, CAS-4 certification for GST valuation, and inventory valuation. If you would like an assessment of whether the Rules apply to your company and what your records currently look like, get in touch at contact@dpjadhav.com.

This article is for general information and does not constitute professional advice. Applicability of the Rules depends on the facts of each case.