Part B: Detailed Information

Part B is an extensive section that provides a holistic picture of the multinational group. It requires information on the following:

1. Organizational Structure:

a. A list of all constituent entities in the international group, along with their respective locations and ownership links.

b. A group structure chart showing the legal and ownership relationships among entities.

2. Business Overview:

a. Nature of the group’s core businesses.

b. Key drivers of profit within the organization.

c. A description of the supply chain for the top five products or services by revenue, or for any product or service contributing more than 5 percent of the group’s revenue.

d. Information on intra-group services (excluding R&D).

e. Description of the principal service providers within the group.

f. Transfer pricing policies for allocating and pricing intra-group services.

g. Major geographical markets for products and services.

3. Functional Analysis:

a. Functions performed, assets employed, and risks assumed (FAR analysis) by key constituent entities contributing at least 10 percent of the group’s revenues, profits, or assets.

4. Intangibles and Financial Arrangements:

a. Details of ownership and use of intangible property.

b. Group’s overall strategy for development, enhancement, maintenance, protection, and exploitation of intangibles.

c. Key inter-company financing arrangements, including how they are structured.

5. Restructurings and Acquisitions:

a. Details of any business reorganizations, acquisitions, or divestitures during the accounting year.

6. Additional Explanations:

a. Any further information necessary for tax authorities to understand the group’s structure, operations, and transfer pricing framework.

This information must align with the accounting period of the parent entity of the international group. It must be retained for eight years from the end of the relevant assessment year.

Indian vs OECD Requirements

While India’s Master File requirements largely mirror the OECD guidelines, there are certain distinctions:

1. In India, Part A must be filed by all constituent entities, regardless of thresholds, ensuring basic disclosure across all cases.
2. The Indian rules focus on the FAR analysis only for entities that make a significant (10% or more) contribution to the group’s revenues, profits, or assets.
3. India’s framework places slightly greater emphasis on domestic compliance alignment and statutory formats.

These differences make India’s approach more prescriptive and compliance-driven compared to the OECD model.

Best Practices for Preparation

1. Start Early:
   Begin gathering data and preparing narratives well before the end of the financial year to ensure completeness.
2. Consistency Across Jurisdictions:
   Maintain consistency between the Master File submitted in India and that filed in other jurisdictions to avoid mismatches or red flags.
3. Maintain Supporting Documents:
   Back every disclosure with financial statements, inter-company agreements, and transfer pricing studies.
4. Internal Coordination:
   Collaborate with group finance, legal, and tax teams to ensure accurate and holistic reporting.
5. Timely Designation:
   If multiple entities are operating in India, finalize and notify the designated filing entity in time via Form 3CEAB.
6. Retention and Readiness:
   Maintain documentation and supporting files in an easily accessible manner for the prescribed eight-year period to facilitate potential audit or review.