No GST applicable on ESOP/ESPP/RSU Transactions between Foreign Holding Companies and Domestic Subsidiaries, says CBIC

The Central Board of Indirect Taxes and Customs (CBIC) clarified the GST implications on ESOP/ESPP/RSU transactions between foreign holding companies and their Indian subsidiaries. Indian companies often offer these securities/shares of their foreign parent companies to employees as part of their compensation package. The CBIC confirmed that the transfer of securities/shares by the foreign holding company directly to employees of the Indian subsidiary, and subsequent reimbursement by the subsidiary to the holding company, does not constitute a taxable supply under GST. However, if the foreign holding company charges additional fees for facilitating these transactions, GST would apply on such charges under reverse charge mechanism. This clarification ensures that basic ESOP/ESPP/RSU transactions are not subject to GST, aligning with the treatment of securities/shares as neither goods nor services under GST law.