Is there any condition under which VAT incurred on expenses cannot be claimed?

VAT will not be deductible for non-taxable supplies. Customs duty paid at the time of import cannot be claimed for payment of VAT. Furthermore, input tax cannot be deducted if it is incurred for certain expenses, such as entertainment expenses.

For instance, if Mr. Ali, manager of SR Steel in Dubai, takes his team out for dinner, he cannot claim input tax credit for this expense.