BIR Ruling

August 29, 1975 Lamsan Trading, Inc. P. O. Box 101 Cotabato City Attention: Mr . Johny T . Lu Chief, Accountant Gentlemen : This refers to your letter dated July 16, 1975 stating that Lamsan Trading, Inc. is a manufacturer of Cornstarch and Glucose of which corn is the basis raw material; that in the process of manufacturing cornstarch, some by-products are produced like gluten feed and gluten meal which are considered as animal feed. cdi From the foregoing, you would like to be informed (1) whether the cost of corn, an agricultural product and therefore exempt from the sales tax under Section 188(b) of the Tax Code, is deductible from the gross selling price or gross value in money of the manufactured products; and (2) the rate of sales tax applicable to your manufactured products. In reply, I have the honor to inform you that under Section 186-A of the Tax Code, whenever a tax-free product is utilized in the manufacture or production of any article, in the determination of the value of such finished articles, the value of such tax-free product shall be deducted. Thus it is clear that even if corn is exempt from tax, the value thereof is deductible from the gross selling price of your finished products. As regards your second query, you are advised that your gluten feed and gluten meal products, which are considered as animal feeds, are subject to the 5% sales tax prescribed in Section 186-B of the Tax Code. However, your cornstarch and glucose products are subject to the 7% sales tax prescribed in Section 186 of the same Code, for the reason that said products do not come within the purview of processed fruits or vegetables under Section 186-B. cdta Very truly yours, (SGD.) CONRADO P. DIAZ Acting Commissioner of Internal Revenue TAN-1182-568-4