CA in Jaipur | CA. Yogesh Jangid |ITR Filing 2023 | Company Registration | NGO Registration | Income Tax Raid Cases | Audit | Inc Incroporation | CPA in India | Subsidy | Project Funding | GST | GST Raid Cases | Income Tax Notice Faceless | DRI Cases | https://www.nyca.in ITR Filing 2023 | Company Registration | NGO Registration | Income Tax Raid Cases | Audit | Inc Incroporation | CPA in India | Subsidy | Project Funding | GST | GST Raid Cases | Income Tax Notice Faceless | DRI Cases Thu, 27 Jun 2024 06:12:56 +0000 en-US hourly 1 https://wordpress.org/?v=6.9.1 https://www.nyca.in/wp-content/uploads/2022/08/9060CA_logo_icai-1.jpg CA in Jaipur | CA. Yogesh Jangid |ITR Filing 2023 | Company Registration | NGO Registration | Income Tax Raid Cases | Audit | Inc Incroporation | CPA in India | Subsidy | Project Funding | GST | GST Raid Cases | Income Tax Notice Faceless | DRI Cases | https://www.nyca.in 32 32 CBIC Circular on GST Taxability of ESOP/ESPP/RSU by Indian Companies https://www.nyca.in/cbic-circular-on-gst-taxability-of-esop-espp-rsu-by-indian-companies/ https://www.nyca.in/cbic-circular-on-gst-taxability-of-esop-espp-rsu-by-indian-companies/#respond Thu, 27 Jun 2024 06:12:56 +0000 https://www.nyca.in/?p=11555 Understand the tax implications of ESOPs, ESPPs, and RSUs provided by Indian companies through overseas holding companies. Learn from CBIC Circular No. 213/07/2024-GST dated June 26, 2024, about GST applicability, exemptions, and more.

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The CBIC has issued Circular No. 213/07/2024-GST dated June 26, 2024, addressing the taxability of Employee Stock Option Plans (ESOPs), Employee Stock Purchase Plans (ESPPs), and Restricted Stock Units (RSUs) provided by Indian companies through their overseas holding companies to their employees.

This clarification responds to queries from trade and field formations regarding the GST implications when Indian subsidiaries offer their employees the opportunity to receive securities or shares from their foreign holding companies as part of their employment compensation package. Here’s a breakdown of the key points clarified by the CBIC:

  • Transaction Overview: Indian subsidiary companies grant ESOPs/ESPPs/RSUs to their employees, allowing them to acquire securities or shares of the foreign holding company. The foreign holding company directly allocates these securities/shares to the employees upon exercise of their options, and the Indian subsidiary typically reimburses the cost of these securities/shares to the foreign holding company.
  • GST Applicability: Securities or shares, including those issued under ESOPs/ESPPs/RSUs, do not fall under the definition of goods or services as per the CGST Act. Therefore, the transfer of securities/shares by the foreign holding company to the employees of the Indian subsidiary, and the subsequent reimbursement by the Indian subsidiary to the foreign holding company on a cost-to-cost basis, does not attract GST.
  • Exception: If the foreign holding company charges any additional fee, markup, or commission for issuing these securities/shares, GST would apply on such additional amounts. The Indian subsidiary would be liable to pay GST on a reverse charge basis for these facilitation services provided by the foreign holding company.
  • Employee Services Exemption: Services provided by employees to their employers in the course of employment are explicitly excluded from the scope of GST under Entry 1 of Schedule III of the CGST Act. Therefore, the issuance of securities/shares under ESOPs/ESPPs/RSUs, which form part of the employees' remuneration, is not subject to GST.
  • Trade Notices: It is recommended that trade notices be disseminated to ensure widespread understanding of the circular’s directives among stakeholders.

For further details, please refer to Circular No. 213/07/2024-GST dated June 26, 2024, accessible here

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