This circular provides clarification on the GST implications for Employee Stock Option Plans (ESOP), Employee Stock Purchase Plans (ESPP), and Restricted Stock Units (RSU) offered by an Indian subsidiary to its employees through its foreign holding company.

It explains that when shares or securities of a foreign holding company are allotted directly to employees of the Indian subsidiary, and the Indian subsidiary merely reimburses the cost of such shares to the foreign holding company on a cost-to-cost basis, the transaction does not constitute supply of goods or services under the CGST Act. Hence, no GST is payable on such reimbursement.

However, if the foreign holding company charges any additional fee, markup, or commission over and above the actual cost of the securities, such amount will be treated as consideration for supply of facilitation services and will attract GST under reverse charge in the hands of the Indian subsidiary.