CBIC Clarifies GST Applicability on ESOPs from Foreign Companies

The CBIC clarified that ESOPs given by foreign companies to employees of Indian subsidiaries at market value won't attract GST. However, additional charges will fall under GST. This clarification came post the GST Council meeting on June 22 and is part of 16 circulars issued.

The Central Board of Indirect Taxes and Customs (CBIC) has made a significant clarification regarding the applicability of Goods and Services Tax (GST) on Employee Stock Option Plans (ESOPs) provided by foreign companies to employees of their Indian subsidiaries. According to CBIC, ESOPs offered at prevailing market value by foreign companies will not be subject to GST.

However, the situation changes if there are additional charges beyond the cost of securities or shares. These extra charges will come under the purview of GST. This clarification forms part of one of the 16 circulars issued following the GST Council meeting on June 22.

According to Moore Singhi Executive Director Rajat Mohan, this clarification confirms that no GST will be levied on transactions between the domestic and foreign subsidiary for the issuance of ESOPs, as these internal corporate arrangements do not constitute a taxable supply.

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