BIR Ruling [DA-201-98]

May 21, 1998 BIR RULING [DA-201-98] Mr. Rudy L. Magcalas Rm. 407 Consolacion Building General Santos St., Araneta Center Cubao, Quezon City S i r : This refers to your letter dated November 3, 1997 stating that your client, Sunrise Management Corporation is engaged in the selling of water thru deep well; and that its customers, who are largely within the community circle, fetch water directly from its water pumping station and bill them accordingly. Based on the foregoing, you now request for a ruling as to whether or not said business is subject to value-added tax. In reply thereto, please be informed that water has been classified as a mineral product rather than agricultural. The term "minerals" shall mean all naturally occurring inorganic substances (found in nature) whether in solid, liquid, gaseous, or any intermediate state. On the other hand, the term "mineral products" shall mean things produced and prepared in a marketable state by simple treatment such as washing or drying, but without undergoing any chemical change or process or manufacturing, by the lessee, concessionaire or owner of mineral lands. It follows therefore that water, being a substance naturally occurring in nature, is mineral rather than agricultural product. Under Revenue Memorandum Circular No. 7-94, sale of water which is a mineral product by persons engaged in the business of supplying water shall be subject to the 10% value-added tax pursuant to Section 106(A) of the Tax Code of 1997. Accordingly, the sale of water shall be subject to the 10% value-added tax. (BIR Ruling No. DA-250-97 dated July 25, 1997) 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, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)