ESOPs by foreign cos in India not under GST

New Delhi: ESOPs given by foreign companies to employees of its Indian subsidiary at prevailing market value will not attract GST, the CBIC has said. However, Employee Stock Option (ESOP)/Employee Stock Purchase Plan (ESPP)/ Restricted Stock Unit (RSU) provided by a foreign company to its India subsidiary employee would come under GST net if an additional amount over and above the cost of securities/shares is charged by the foreign holding company from the domestic arm.

This clarification forms part of the 16 circulars issued by the Central Board of Indirect Taxes and Customs (CBIC), following the meeting of the GST Council on June 22.

Some Indian companies provide the option to their employees for allotment of securities/shares of their foreign holding company as part of the compensation package as per the terms of the contract of employment. In such cases, on exercising the option by the employees of an Indian subsidiary, the securities of a foreign holding company are allotted directly by the holding company to the employee. The cost of such securities is generally reimbursed by the subsidiary company to the holding company.