BIR Ruling [DA-077-03]

March 14, 2003 BIR RULING [DA-077-03] 109 (c) 007-2001 dtd. 2/16/01 Tokyo Tokyo Japanese Restaurant Central Kitchen 85 P. Tuazon St. Cubao, Quezon City Attention: Mr. Eduardo M. Pineda Administrative Manager Gentlemen : This refers to your letter dated December 9, 2002, requesting for a ruling to the effect that the sale of sashimi by your client TOKYO TOKYO Japanese Restaurant is exempt from VAT. It is represented that you are the representative of affiliated companies operating the Tokyo Tokyo Japanese fast food chain within and around Metro Manila and in nearby provinces; that one of the menu items of Tokyo Tokyo is sashimi , a marine food product in its original state wherein no chemical had been introduced to the meat or fillet; that its exterior texture or form had not been altered when served to customers; that said meat or fillet are usually imported from abroad; that the steps that are followed prior to the sale of the menu item are as follows: (1) the loin is deboned by cutting it from the spine of the fish; (2) the loin is delivered to the commissary by suppliers; (3) In the commissary, the loin is cut or sliced to segregate the meat or fillet suitable for sashimi from the rest of the meat or fillet which is utilized in other menu items; (4) the meat or fillet is delivered by the commissary to the stores in accordance with the requisitioned quantity; and (5) In each store, the meat or fillet is further sliced into bite size portions after which it is now ready to be served to customers. In reply, please be informed that the 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 foods for human consumption; and breeding stock or genetic materials is exempt from VAT. [ Sec. 109(c), Tax Code of 1997 ] Meat, fruit, fish, vegetable 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, broiling, roasting, smoking or stripping, including those using advanced technological means of packaging, such as shrink wrapping in plastics, vacuum packing, tetra-pack and other similar packaging method. [ Sec. 4. 103-1 (B), RR 7-95 ] IDSaTE In VAT Ruling No. 064-88, this Office held that "ground beef, chopped and frozen, qualifies for exemption from VAT" as agricultural food product in its original state. Verily, deboning is a simple process which does not alter the substance of a thing, much less transform the meat into another distinct product altogether. What would be outside of the scope of the term "simple process" is the kind of physical or chemical process which would alter the exterior texture or form or inner substance of a product in such a manner as to prepare it for special use to which it could not have been put in its original form or condition. ( VAT Committee Ruling #007-2001 ) In the light of the foregoing, this Office is of the opinion and so holds that sashimi is within the purview of the definition of marine food product in its original state, hence, the importation and sale thereof by your restaurant are exempt from the 10% value-added tax pursuant to Section 109(c) of the Tax Code of 1997. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group