GST & Indirect TaxUpdated 5 October 2026

GST on ESOP Cost Recharge by Foreign Parent: Import-of-Service and Valuation Review

By Ravi Sisodia · Reviewed by CA Divyanshu Sengar · Updated 5 October 2026

2-minute summary

Separate the fair/market value of shares from the actual recharge basis used between parent and subsidiary.
If the foreign parent recharges only the cost of securities/shares on a cost-to-cost basis, Circular 213 gives a specific non-tax clarification.
A plan administration fee, brokerage, service charge or markup is not protected merely because it appears on the same intercompany invoice.
Payroll accounting, perquisite tax and Ind AS/ESOP expense are separate from GST supply character and should be reconciled but not conflated.

Current position

CBIC Circular 213 clarifies that shares/securities issued under ESOP/ESPP/RSU are neither goods nor services and that a cost-to-cost reimbursement by the Indian subsidiary to the foreign holding company for those shares is not taxable. Any additional fee, markup or commission charged for arranging/administering the plan must be analysed separately as a service.

Control and evidence map

#	Control	What the file should show
1	Obtain the plan rules, employee grant/vest/exercise records and parent recharge calculation.
2	Split share-cost reimbursement from any service/administration component.
3	Match intercompany recharge to employee-level or pool-level securities issued.
4	Apply Circular 213 to cost-to-cost reimbursement and normal import-of-service rules to any taxable fee.
5	Reconcile GST position with payroll/perquisite and share-based-payment accounting.

Worked example

The foreign parent issues RSUs to employees of the Indian subsidiary and recharges Rs. 1.2 crore equal to the share cost, plus Rs. 6 lakh as an administration fee. Circular 213 supports the cost-to-cost securities reimbursement being outside GST, but the Rs. 6 lakh fee needs a separate import-of-service/RCM analysis. Booking the entire Rs. 1.26 crore under one “ESOP recharge” ledger obscures the distinction.

Common mistakes

Applying GST to the share value merely because cash is reimbursed.
Treating a markup or service fee as part of the non-tax cost-to-cost clarification.
Ignoring employee-level evidence linking the recharge to actual securities.
Mixing GST analysis with income-tax perquisite valuation.

Frequently asked questions

Is cost-to-cost ESOP share recharge taxable?

Circular 213 clarifies that cost-to-cost reimbursement for securities/shares issued under the covered arrangement is not taxable.

What if the parent adds a fee?

The additional fee/markup can represent a taxable service and requires separate analysis.

Are shares goods or services under GST?

Securities are excluded from the definitions of goods and services.

What should finance split in the ledger?

Share/securities reimbursement, administration/service fee, payroll/perquisite entries and any GST/RCM amount.

Official sources

CBIC / GST Council - Circular 213/07/2024-GST - ESOP/ESPP/RSU reimbursement (2024-06-26)
Central Board of Indirect Taxes and Customs - Central Goods and Services Tax Act, 2017 (current consolidated law)

Disclaimer: Educational and informational content only. Apply the current law, instrument, contract and facts before acting; obtain professional advice for material or disputed matters.

Disclaimer

Educational and professional reference only; confirm the current law, rates and the facts of your case before relying on this page.