Tax Credit on the Sales Tax on the Importation of Sodium Sulfite

January 26, 1988 BIR RULING NO. 008-88 162-c 000-00 008-88 Gentlemen : This refers to your letter dated November 19, 1987 making reference to BIR Ruling No. 312-87 dated November 6, 1987 which allows you to claim tax credit to the full extent of the advance sales tax paid on your importation of sodium sulfite which is used in the manufacture of Tellurium Dioxide and Selenium (Elemental) which are your export products registered with the Board of Investments pursuant to Article 48(i) of P.D. No. 1789 as amended by B.P. Blg. 391. cdt In connection therewith, you are requesting another ruling which would allow you to claim tax credit for any sales or advance sales tax paid with respect to the other raw materials, namely Caustic Soda, Activated Carbon, Calcium Chloride, Filter Acid, Sodium Sulfide and Sodium Sulfite; that the costs of said other raw materials do not constitute at least 40% of the production cost of the registered export products. In reply, I have the honor to quote hereunder said Article 48(i) as follows: "(i) Tax Credit for Taxes and Duties on Raw Materials . Every registered export producer shall enjoy a tax credit equivalent to the sales, compensating and specific taxes and duties paid on the supplies, raw materials and semi-manufactured products used in the manufacture, processing or production of its export products and forming part thereof, exported directly by the registered exports producer or sold to an export trader who subsequently exports said products. Provided, however , That where the cost of certain supplies or raw materials constitutes at least forty percent (40%) of the cost of production of the registered export product, tax credit on sales, specific taxes and duties paid thereon may also be granted even if they do not form part of the registered export product : and Provided, further , That the taxes on the supplies, raw materials and semi-manufactured products domestically purchased are indicated as a separate item in the sales invoice." xxx xxx xxx Under the above-quoted provision, it can be concluded that if the raw materials do not constitute at least 40% of the production costs of the registered export products, the sales tax paid thereon may be allowed as tax credit, provided that they form part of the export products and exported directly by the registered export producer. Accordingly, since cost of the above-enumerated raw materials does not constitute at least 40% of the production cost of your registered export products and it appearing from the evidence submitted that said raw materials form part of your export products, you are entitled to tax credit of the sales or advance sales tax paid on said raw materials. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner