diff --git a/core/state_transition.go b/core/state_transition.go
index 633fbbcb6..3ab528488 100644
--- a/core/state_transition.go
+++ b/core/state_transition.go
@@ -188,6 +188,12 @@ func (st *StateTransition) preCheck() error {
 // TransitionDb will transition the state by applying the current message and
 // returning the result including the used gas. It returns an error if failed.
 // An error indicates a consensus issue.
+//
+// Quorum:
+// 1. Intrinsic gas is calculated based on the encrypted payload hash
+//    and NOT the actual private payload
+// 2. For private transactions, we only deduct intrinsic gas from the gas pool
+//    regardless the current node is party to the transaction or not
 func (st *StateTransition) TransitionDb() (ret []byte, usedGas uint64, failed bool, err error) {
 	if err = st.preCheck(); err != nil {
 		return
@@ -231,7 +237,7 @@ func (st *StateTransition) TransitionDb() (ret []byte, usedGas uint64, failed bo
 
 	var (
 		leftoverGas uint64
-		evm = st.evm
+		evm         = st.evm
 		// vm errors do not effect consensus and are therefor
 		// not assigned to err, except for insufficient balance
 		// error.
@@ -255,6 +261,7 @@ func (st *StateTransition) TransitionDb() (ret []byte, usedGas uint64, failed bo
 		//if input is empty for the smart contract call, return
 		if len(data) == 0 && isPrivate {
 			st.refundGas()
+			st.state.AddBalance(st.evm.Coinbase, new(big.Int).Mul(new(big.Int).SetUint64(st.gasUsed()), st.gasPrice))
 			return nil, 0, false, nil
 		}
 
diff --git a/core/state_transition_test.go b/core/state_transition_test.go
new file mode 100644
index 000000000..06d563540
--- /dev/null
+++ b/core/state_transition_test.go
@@ -0,0 +1,115 @@
+package core
+
+import (
+	"fmt"
+	"math/big"
+	"testing"
+
+	"github.com/ethereum/go-ethereum/private"
+
+	"github.com/ethereum/go-ethereum/common"
+	"github.com/ethereum/go-ethereum/core/state"
+	"github.com/ethereum/go-ethereum/core/vm"
+	"github.com/ethereum/go-ethereum/ethdb"
+	"github.com/ethereum/go-ethereum/params"
+
+	testifyassert "github.com/stretchr/testify/assert"
+)
+
+func verifyGasPoolCalculation(t *testing.T, pm private.PrivateTransactionManager) {
+	assert := testifyassert.New(t)
+	saved := private.P
+	defer func() {
+		private.P = saved
+	}()
+	private.P = pm
+
+	txGasLimit := uint64(100000)
+	gasPool := new(GasPool).AddGas(200000)
+	// this payload would give us 25288 intrinsic gas
+	arbitraryEncryptedPayload := "4ab80888354582b92ab442a317828386e4bf21ea4a38d1a9183fbb715f199475269d7686939017f4a6b28310d5003ebd8e012eade530b79e157657ce8dd9692a"
+	expectedGasPool := new(GasPool).AddGas(174712) // only intrinsic gas is deducted
+
+	db := ethdb.NewMemDatabase()
+	privateState, _ := state.New(common.Hash{}, state.NewDatabase(db))
+	publicState, _ := state.New(common.Hash{}, state.NewDatabase(db))
+	msg := privateCallMsg{
+		callmsg: callmsg{
+			addr:     common.Address{2},
+			to:       &common.Address{},
+			value:    new(big.Int),
+			gas:      txGasLimit,
+			gasPrice: big.NewInt(0),
+			data:     common.Hex2Bytes(arbitraryEncryptedPayload),
+		},
+	}
+	ctx := NewEVMContext(msg, &dualStateTestHeader, nil, &common.Address{})
+	evm := vm.NewEVM(ctx, publicState, privateState, params.QuorumTestChainConfig, vm.Config{})
+	arbitraryBalance := big.NewInt(100000000)
+	publicState.SetBalance(evm.Coinbase, arbitraryBalance)
+	publicState.SetBalance(msg.From(), arbitraryBalance)
+
+	testObject := NewStateTransition(evm, msg, gasPool)
+
+	_, _, failed, err := testObject.TransitionDb()
+
+	assert.NoError(err)
+	assert.False(failed)
+
+	assert.Equal(new(big.Int).SetUint64(expectedGasPool.Gas()), new(big.Int).SetUint64(gasPool.Gas()), "gas pool must be calculated correctly")
+	assert.Equal(arbitraryBalance, publicState.GetBalance(evm.Coinbase), "balance must not be changed")
+	assert.Equal(arbitraryBalance, publicState.GetBalance(msg.From()), "balance must not be changed")
+}
+
+func TestStateTransition_TransitionDb_GasPoolCalculation_whenNonPartyNodeProcessingPrivateTransactions(t *testing.T) {
+	stubPTM := &StubPrivateTransactionManager{
+		responses: map[string][]interface{}{
+			"Receive": {
+				[]byte{},
+				nil,
+			},
+		},
+	}
+	verifyGasPoolCalculation(t, stubPTM)
+}
+
+func TestStateTransition_TransitionDb_GasPoolCalculation_whenPartyNodeProcessingPrivateTransactions(t *testing.T) {
+	stubPTM := &StubPrivateTransactionManager{
+		responses: map[string][]interface{}{
+			"Receive": {
+				common.Hex2Bytes("600a6000526001601ff300"),
+				nil,
+			},
+		},
+	}
+	verifyGasPoolCalculation(t, stubPTM)
+}
+
+type privateCallMsg struct {
+	callmsg
+}
+
+func (pm privateCallMsg) IsPrivate() bool { return true }
+
+type StubPrivateTransactionManager struct {
+	responses map[string][]interface{}
+}
+
+func (spm *StubPrivateTransactionManager) Send(data []byte, from string, to []string) ([]byte, error) {
+	return nil, fmt.Errorf("to be implemented")
+}
+
+func (spm *StubPrivateTransactionManager) SendSignedTx(data []byte, to []string) ([]byte, error) {
+	return nil, fmt.Errorf("to be implemented")
+}
+
+func (spm *StubPrivateTransactionManager) Receive(data []byte) ([]byte, error) {
+	res := spm.responses["Receive"]
+	if err, ok := res[1].(error); ok {
+		return nil, err
+	}
+	if ret, ok := res[0].([]byte); ok {
+		return ret, nil
+	}
+	return nil, nil
+}