BIR Ruling [DA-362-03]

October 13, 2003 BIR RULING [DA-362-03] Section 109 (e); 148 (k) BIR Ruling No. 087-98 Heng Ji Commercial Corporation (No Return Address) Attention: Mr. Co Giok Eng Treasurer Gentlemen : This refers to your letter dated September 15, 2003 requesting for a ruling as to whether or not the withholding of creditable VAT on income payments by the Department of Public Works and Highways is correct. It is represented that HENG JI COMMERCIAL CORPORATION is a Non-VAT taxpayer with Certificate of Registration No. OCN-0803-077-02683; that you are engaged as a petroleum products wholesaler in Bacolod City; that you buy asphalt from Petron Philippines; that you supply this asphalt to the Department of Public Works and Highways (DPWH), 1st Negros Occidental Engineering District; that DPWH withholds the 3% creditable value added tax, claiming that you are subject to VAT; and that you believe otherwise on the basis of BIR Ruling No. 087-98 dated June 10, 1998 which was signed by the then BIR Commissioner Liwayway V. Vinzons-Chato. In reply, please be informed that Section 103(e) of the Tax Code, as amended by R.A. No. 7716 as further amended by R.A. No. 8241 (now Section 109(e) of the Tax Code of 1997), exempts from VAT the "sale or importation of coal and natural gas, in whatever form and state and petroleum products (except lubricating oil, processed gas, grease, wax and petrolatum) subject to excise taxes under Title VI of the Code". Under Section 2(1) of Revenue Regulations No. 8-96, the term "petroleum products" include among others, asphalts subject to excise tax at the rate of P0.56 per kilogram pursuant to Section 145(11) of the Tax Code, as amended by R.A. No. 8184 (now Section 148(k) of the Tax Code of 1997). DEICaA Accordingly, since the sale of asphalts is exempt from VAT, the withholding of the creditable VAT by the DPWH on account of your sale to the latter has no legal basis. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group