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Taxation Central Ministry of Finance Central Goods and Services Tax Act, 2017

Clarification on the taxability of ESOP/ESPP/RSU provided by a company to its employees through its overseas holding company

26-Jun-2024 | CircularNo.213/07/2024-GST

Ministry of Finance has issued Clarification on the taxability of ESOP/ESPP/RSU provided by a company to its employees through its overseas holding company. By virtue of this notification, it is clarified that the foreign holding company issues securities/shares as ESOP/SPP/RSU to the employees of the domestic subsidiary company at the request of the said domestic subsidiary company. Since these transactions do not fall under the supply of goods or services as per the GST Act, GST is not leviable on said transaction of sale/purchase/transfer of securities/shares. The ESOP/ESPP/RSU is a part of the remuneration of the employee by the employer as per terms of employment. As per Entry 1 of Schedule III of the CGST Act, the services by an employee to the employer in the course of or about his employment are treated neither as the supply of goods nor as the supply of services. Therefore, GST is not leviable on the compensation paid to the employee by the employer as per the terms of the employment contract which involves transfer of securities/shares of the foreign holding company to the employees of the domestic subsidiary company.

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