Acquisition diligence should map GST exposure by transaction structure, period and business activity, then connect identified issues to pricing, conditions, indemnities and post-closing cooperation. Analyse statutory liability independently of the parties' allocation. A seller indemnity does not prevent a tax authority from applying the relevant law.
The business situation
A buyer acquires a business and receives a notice concerning pre-closing supplies months later. The sale agreement allocates the tax to the seller, but the buyer cannot obtain the supporting records or require the seller to manage the response promptly.
A GST dispute must be analysed by transaction, tax period, statutory provision and procedural stage. A reconciliation difference is a starting point for investigation, not a substitute for the statutory test. Keep liability, interest, penalty and available procedure separate in the working file.
What needs examining
01. Start with the structure and liability perimeter
A share purchase, business transfer and asset acquisition can create different legal consequences. Examine the applicable provisions on transfer or succession and identify which entity holds the records and registrations. Do not infer the tax result from the transaction's commercial label. Record periods, unresolved proceedings and uncertain positions separately.
02. Turn findings into specific transaction protections
Classify known issues, contingent exposure and gaps in available evidence. Decide whether an issue needs pre-closing remediation, a price adjustment, a specific indemnity or another protection. Define notice, defence control, settlement consultation and access to records. A broad general warranty may be a poor substitute for a known issue requiring a tailored response.
03. Make post-closing cooperation operational
Identify custodians, access rights, data formats and response deadlines. Preserve records that may be needed long after the integration team has moved on. Coordinate tax, finance and legal ownership of open issues. Track claim deadlines under the agreement separately from statutory proceedings; the two calendars may not align.
Law, contract and recommended practice
CGST and applicable SGST or UTGST law, the IGST Act, rules, notifications and period-specific amendments must be read together. Verify the legislation operative for the relevant period. This collection does not prescribe a universal notice, appeal or refund deadline.
Connect the control to the evidence
Use this table to scope the review. The legal basis and the practical control are identified separately.
| Obligation or objective | Practical control | Evidence to retain |
|---|---|---|
| Statutory assessment Identify liability under the actual structure | Transfer and period-specific tax analysis | Transaction structure and issue register |
| Contractual control Allocate identified historic exposure | Specific indemnity and conduct-of-claims terms | Disclosure and protection schedule |
| Recommended practice Keep the response evidence accessible | Records-access and cooperation plan | Custodian register and archived records |
Records to prepare
Bring the complete, current record to the review. Preserve earlier versions where a change or disputed event makes them relevant.
Common questions
Does a tax indemnity bind the tax department?
It generally allocates rights between the contracting parties. It does not displace statutory liability or prevent the authority from exercising powers available under the relevant law.
Should known tax issues sit only in general warranties?
Consider specific treatment. A known issue may need a condition, price adjustment, dedicated indemnity and an agreed response process, depending on its nature and the deal structure.
For every material historic issue, identify who may face the authority, who bears the agreed cost and who can produce the evidence. Those answers should remain workable after integration.
Legislation & official resources
These references identify the governing frameworks. Confirm the current text, relevant amendments and applicable judicial position for the matter.
- CGST Act, 2017 — CBIC reference compilationCentral Board of Indirect Taxes and Customs · Historical compilation as at 30 September 2020. Later amendments must be checked for the relevant period; this is not a current consolidated text.
- GST Acts — official CBIC resourcesCentral Board of Indirect Taxes and Customs · Legislative resource index. Check the applicable central, state and integrated-tax provisions and current notifications.
This note is general information. The scenario is hypothetical and does not describe a client matter. The legal result depends on the facts, documents, jurisdiction and operative law. No individual lawyer review is represented by the preparation date.
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