Reporting items in tax audit report by the tax auditor could invite default disallowance.
It so happened that the tax auditor reported certain amount as expenditure incurred at clubs being entrance fees & subscriptions as well as cost for club services and facilities used. The tax officer understood such disclosure as qualification and added to returned income.
It has been the plea of the assessee company that it had obtained corporate membership of clubs having affiliations across India for its Directors and senior employees to interact with customers and other stakeholders Such clubs provide a perfect platform for interactions, exchange of information and to conduct business. The club facilities are used as a platform for holding business meetings of the directors and senior employees to interact with business partners and customers. The activities undertaken by the Directors and the senior employees in such clubs are in the nature of business meetings, networking, brand building, dealings and business gatherings between suppliers/customers and/or senior executives of the appellant company, which fosters the business interests of the appellant company. In the circumstances, the club membership and club service expenses borne by the company were incurred in the course and for the purposes of business.
The Kolkata Tribunal in [2025] 175 taxmann.com 352 (Kolkata – Trib.)[10-06-2025] allowing relief to company found no infirmity in this understanding and practice.
The Input Tax Credit (ITC) Scheme under GST laws does not allow ITC of membership of a club, health and fitness centre [section 17 (5) (b) (ii) of CGST Act, 2017].
Given this established practice there is no any ground to disallow input tax credit in GST laws on club expenditure. The law stating otherwise in section 17(5) of CGST Act need reconsideration.