BIR Ruling [DA-069-04]

February 12, 2004 BIR RULING [DA-069-04] Bagumbayan Traders Corporation TLC Center 15 Aguirre Street BF Homes, Paraaque City Attention: Ms. Virginia V. Serrano & Mr. Leve C. Estorgio Gentlemen : This refers to your letter dated December 4, 2003 requesting for a ruling that the sale of meat in its original state by Hunter Valley Meat and Deli ("Hunter Valley") is exempt from Value-Added Tax (VAT) pursuant to Section 109 of the Tax Code of 1997. It is represented that Hunter Valley sells meat in its original state, as well, as processed meat products; that it is registered with the BIR under Certificate of Registration No. 9RC0000109558 as a wholesaler and retailer of meat and deli products; that Hunter Valley's registration with the BIR does not specifically state its tax type; that you went to Revenue District Office No. 52 to inquire if you have to specifically register Hunter Valley as a non-VAT taxpayer for its VAT exempt sale of meat in its original state and as a VAT registered taxpayer for its sale of processed meat; that you were told to secure a ruling/authority from the national office first before Hunter Valley can avail of the VAT exempt status; and that you are applying at the same time for an authority to print both VAT and non-VAT receipts for Hunter Valley's above transactions. In reply thereto, please be informed that under Section 109(c) of the Tax Code of 1997, sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing food for human consumption; and breeding stock and genetic materials is exempt from VAT. Sec. 4.103-1-B (c) of Revenue Regulations No. 7-95 provides that meat, fruit, fish, vegetables and other agricultural and marine food products shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market such as freezing, drying, salting, smoking or stripping, including those using advanced technological means of packaging, such as shrink wrapping in plastics, vacuum packing, tetra-pak, and other similar packaging methods. 1 Such being the case, the sale of meat in its original state by Hunter Valley is exempt from VAT. However, its sale of processed meat is subject to the 10% VAT. On the other hand, under the general registration requirements, 2 a person may either be engaged in business in the course of which his transactions in certain goods or services are either: (a) exempt from VAT or (b) subject to VAT. Therefore, a person may register either as a non-VAT or VAT taxpayer, or both at the same time depending on the activity in which he is engaged in. Accordingly, Hunter Valley must register as non-VAT taxpayer with respect to its sale of meat in its original state and as VAT taxpayer with respect to its sale of processed meat. HaAISC Moreover, under Section 21 of Revenue Regulations No. 7-95, it is mandatory for a VAT-registered person who is also engaged in VAT-exempt sales to issue a separate VAT invoice for the VATable transactions and non-VAT invoice for the exempt transactions. Thus, to comply therewith, Hunter Valley is hereby granted the authority to print both VAT and non-VAT receipts for its above VATable as well as non-VATable transactions. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group Footnotes 1. VAT Ruling No. 023-96 dated September 23, 1996 & BIR Ruling No. 094-97 dated August 26, 1997 as cited in BIR Ruling No. 184-2003 dated June 11, 2003. 2. Sec. 4.17-1, RR No. 7-95.