Which are the expense from which input tax are not recoverable?
Non-Recoverable Input Tax – VAT incurred on any costs which are used for a genuine business purpose, or which are incidental to a business purpose e.g. food and drink provided during a business meeting, shall be recoverable (subject to normal VAT recovery rules).
The food and drinks will become entertainment in nature if the purpose of attending the event is for food and drinks and hence, input tax paid on such expenses cannot be recovered.
Input tax can be claimed on hospitality expenses only if it includes the basic amenities provided to the employees. If hospitality is given for the purpose of attending events or entertainment purpose for Customers, Shareholders, Potential Customers, Officials, etc., such costs will be considered to be entertainment in nature and the VAT incurred shall not be recoverable.