Post-Merger Integration: Tax and Reporting Pitfalls in India

The tax and reporting issues following an India acquisition are largely predictable: registration and licence continuity, establishing a transfer pricing position for newly created intra-group flows, converting reporting to the acquirer’s framework, and managing inherited disputes. Most are cheaper to address in the first ninety days than after the first reporting cycle.

The first ninety days

Registrations and licences. Confirm what transfers automatically and what requires fresh application or amendment. GST registrations across states, tax deduction account details, sector licences and import-export registrations all need review. A lapsed registration discovered at the first filing deadline is disruptive and entirely avoidable.

Authorised signatories and digital credentials. Practical but consistently underestimated. Filings cannot be made without valid credentials, and access frequently sits with departed personnel.

Open assessments and appeals. Establish who is conducting each inherited matter, what the indemnity says about conduct, and the next procedural deadline. Inherited matters lapse for want of attention during integration more often than they are lost on merits.

Filing calendar continuity. Ensure no filing is missed in the transition. Handovers between the outgoing finance team and the acquirer’s are where deadlines are dropped.

Transfer pricing for newly created flows

The acquisition typically creates intra-group transactions that did not previously exist: management services from the acquirer, IP licensing, financing, shared service arrangements, and cost allocations.

Each needs a transfer pricing position from the date it commences, not from the first documentation deadline. Establishing the basis contemporaneously is materially stronger than reconstructing it, and the first year of a new arrangement is precisely the period a subsequent assessment will scrutinise.

Where the Indian entity’s functional profile changes as a result of integration — commonly from independent operator to part of a group structure with reduced decision rights — the characterisation and remuneration should change with it, documented as a deliberate consequence of integration.

Reporting framework conversion

Where the acquirer reports under US GAAP or IFRS and the target under Ind AS, conversion is required for consolidation. The differences consuming most effort are typically revenue recognition timing, lease accounting, business combination accounting including purchase price allocation, share-based payment, and expected credit loss provisioning.

Purchase price allocation deserves specific attention because it must be completed within the permitted measurement period and drives subsequent depreciation and amortisation — noting that goodwill is not depreciable for tax purposes.

Inherited disputes

Assign ownership for each matter. Confirm the indemnity’s conduct provisions, since a seller-controlled defence may not align with the buyer’s interests, particularly where a settlement sets a precedent for later years the buyer will bear.

[INSERT: an anonymised Solique example of a post-acquisition integration where early attention avoided a material cost.]

Related reading

• what diligence identified — Tax Due Diligence for Acquiring an Indian Target
• GAAP reconciliation — Ind AS vs US GAAP vs IFRS: What Subsidiaries Must Reconcile
• transfer pricing for new flows — Transfer Pricing Documentation for Indian Subsidiaries