BIR Ruling [DA-650-99]

November 22, 1999 BIR RULING [DA-650-99] Festival Supermall, Inc. Filinvest Corporate City Alabang, Muntinlupa City Attention: Ana Venus A . Mejia Controller Gentlemen : This refers to your letter dated June 7, 1999 requesting exemption from the coverage of Revenue Regulations No. 8-99 or in the alternative, for an extension until January 1, 2000 within which to comply with the said regulations, for reasons stated therein. In reply, there is quoted hereunder the pertinent portion of VAT Ruling No. 066-99 dated July 14, 1999 which succinctly states the reason for the promulgation of the Revenue Regulations No. 8-99 in this wise: " . . ., the said pronouncement (referring to Revenue Regulations No. 8-99) merely seeks to enforce a direct provision of the law on the matter. Prior to the enactment of Republic Act No. 7716, otherwise known as the Expanded Value-Added Tax Law, VAT-registered taxpayers have the option to indicate VAT as separate item in the invoice/receipt. However the said law effectively repealed that option when it mandated that the VAT shall be determined by multiplying the total amount indicated in the invoice by one-eleventh (1/11). This provision is now embodied in Section 106(D)(1) and Section 108 (C) of the Tax Code of 1997 (then Section 108(C) of the Tax Code of 1997 (then Sections 100(d)(1) and 102(c), NIRC), as implemented by Revenue Regulations No. 7-95. "The said rule is not without any underlying reason. It is precisely appended into the law in address the concern of the consuming public that business establishments may be able to obscure the fact that the VAT is already included in their cost such that if the VAT is allowed to be indicated as a separate item in the invoice, they may be able to charge additional billings in the guise of VAT, hence unduly profiting thereon. On the part of tax administration, what is sought to be removed is the false notion, and convenient excuse, that VAT is the reason for any price increase. Thus, what has been put into place is the credit invoice type method of recognizing input VAT. Simply put, all the one has to do to determine the amount of his input VAT is to look into the gross amount indicated in his receipt and divide it by 1/11, no more no less. LexLib "This is now, and, as it should be, the proper manner of issuing VAT invoice. And for the uniform implementation of this rule, the same was duly disseminated to the public through the official publication or announcement thereof." In view of the foregoing, we regret to deny your aforesaid request for lack of legal basis. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)