Sales Tax at the Rate of 10% on Pharmaceutical Products

January 13, 1987 BIR RULING NO. 005-87 163 (2) (h) 257-86 005-87 Gentlemen : This refers to your letter dated November 24, 1986, requesting that the packaging materials that you purchase and are exclusively used as parts and accessories of your manufactured pharmaceutical article be subject to 10% sales tax. It is represented that Alcon Laboratories (Philippines), Inc. is a pharmaceutical company engaged in local manufacturing of ethical products through contract toll manufacturing with another drug company, and that it likewise purchases local packaging materials that are exclusively used as parts and accessories of the finished pharmaceutical article. In reply, please be informed that pharmaceutical products are essential articles subject to the sales tax at the rate of 10%. (Section 163 (2)(h), Tax Code, as amended by Executive Order No. 36). The raw materials used in the manufacture or preparation of the said essential article consisting of packaging materials shall be taxed at the same rate as the finished product provided that you, as purchaser, shall certify to the manufacturer thereof that the said packaging materials shall be used exclusively in the manufacture of your pharmaceutical products. (Section 163 (2), Tax Code; Section 6.II, Rev. Regs. No. 11-86). If you fail to issue the certification, the manufacturer of the packaging materials shall be subject to 20% sales tax pursuant to Section 163(4) of the Tax Code, as amended. cdta Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner