GST Circular No 213/2024
Clarification on Taxability of ESOP/ESPP/RSU Under GST
Representations have been received from the trade and field formations seeking clarification regarding the taxability of Employee Stock Option (ESOP), Employee Stock Purchase Plan (ESPP), and Restricted Stock Unit (RSU) provided by a company to its employees. It has been noted that some Indian companies offer these options to employees as part of their compensation, where the foreign holding company allocates shares directly to employees, and the cost is reimbursed by the Indian subsidiary.
ESOP/ESPP/RSU transactions involve the foreign holding company issuing shares to the employees of the Indian subsidiary. Under GST, securities/shares are neither considered goods nor services. Therefore, transactions involving the transfer of shares/securities are not subject to GST.
Additionally, the reimbursement of costs for these shares from the Indian subsidiary to the foreign holding company is not liable to GST, as it does not constitute a supply of goods or services.
However, if the foreign holding company charges any additional fees, markup, or commission for issuing ESOP/ESPP/RSU to the employees of the Indian subsidiary, such charges are considered a supply of services. In this case, GST will be applicable on the additional amount charged, and the Indian subsidiary will be liable to pay GST on a reverse charge basis.
