BLOCKED INPUT TAX
190. Input tax incurred by a taxable person in respect of the following supplies shall be excluded from any credit under GST:-
(a) the supply to or importation by him of a passenger motor car;
(b) the supply of goods or services relating to repair, maintenance and refurbishment of a passenger motor car;
(c) the hiring of a passenger motor car;
(d) club subscription fee including any joining fee, membership fee, transfer fee or other fees charged by any club, association, society or organization established principally for recreational or sporting purposes or by the transferor of the membership of such club, association, society or organization as the case may be.;
(e) any payment or contribution towards any insurance contracts or takaful certificates---
(i) for indemnifying the taxable person against the cost of medical treatment to any person;
(ii) against the cost of medical treatment in which the insured or participant is any person employed by the taxable person; or
(iii) against any personal accident in which the insured or participant is any person employed by the taxable person. But does not include any insurance contract or takaful certificate against any liability which the taxable person may incur under the Employees’ Social Security Act 1969 and the Workmen’s Compensation Act 1952 where such expenses is obligatory under the act or any collective agreement within the meaning of the Industrial Relations Act 1967;
(f) any medical expenses incurred in connection with the provision of all forms of medical treatment to any person employed by a taxable person but does not include medical expenses incurred under the Employees’ Social Security Act 1969 and the Workmen’s Compensation Act 1952 where such expenses is obligatory under the act or any collective agreement within the meaning of the Industrial Relations Act 1967;
(g) any family benefits including hospitality of any kind provided by the taxable person for the benefit of any person who is the wife, husband, child including adopted child in accordance with any written law or parents of any person employed by the taxable person; and
(h) entertainment expenses to a person other than employees or existing customers except entertainment expenses incurred by a person who is in the business of providing entertainment.
191. A passenger motor car means a motor car which is constructed or adapted for carrying not more than nine passengers including the driver and the unladed weight of which does not exceed three thousand kilograms but does not include:
(a) hire and drive car which is licensed under Land Public Transport Act 2010 and Tourism Vehicle Licensing Act 1999;
(b) a motor vehicle supplied to or imported by a taxable person for the purposes of being let on hire or sold by that taxable person who is a dealer of motor vehicle licensed under the Second-Hand Dealers Act 1946;
(c) an approved vehicle used for driving instructional purposes by a driving school or driving institute permitted under Motor Vehicles (Driving Schools) Rules, 1992;
(d) a motor car which forms part of the stock in trade of a motor manufacturer or a motor dealer; or
(e) any motor car which is used exclusively for the purposes of business as may approved by the Director General and subject to any condition as the Director General deems fit to impose.
192. Entertainment expense includes—
(a) the provision of any food, drink, recreation or hospitality of any kind; or
(b) the provision of accommodation or travel associated with the provision of food, drink or recreation;
by a person or an employee of his to anyone in connection with a trade or business carried on by that person.
193. Employee, in relation to an employment, means:
(a) the servant, where the relationship of master and servant subsists; or
(b) where the relationship of master and servant does not subsist, the holder of the appointment or office which constitutes the employment.
194. Recreation or hospitality would include:
(a) a trip to a theme park or a recreation centre;
(b) a stay at a holiday resort;
(c) tickets to a show or theatre; and
(d) entry to sporting activities/events
195. Entertainment expenses to family members and potential clients (not existing clients) are disallowed.
(Source : General Guide dated 16.3.2015)