Correct Computation of the 15% Ad Valorem Tax on Native Cigarettes

February 11, 1991 BIR RULING NO. 017-91 142 000-00 017-91 Gentlemen : This refers to B.I.R. Ruling No. 473-88 dated October 4, 1988 to the effect that the correct computation of the 15% ad valorem tax on native cigarettes is in accordance with Section 127(b) of the Tax Code, as amended by Executive Order No. 273, reading: "(b) Determination of gross selling price of goods subject to ad valorem tax . Unless otherwise provided, the price, excluding the value-added tax, at which the goods are sold at wholesale in the place of production or through their sales agents to the public shall constitute the gross selling price. If the manufacturer also sells or allows such goods to be sold at wholesale in another establishment of which he is the owner or in the profit at which he has an interest, the wholesale price in such establishment shall constitute the gross selling price. Should such price be less than the cost of manufacture plus expenses incurred until the goods are finally sold, then a proportionate margin of profit, not less than 10% of such manufacturing cost and expenses, shall be added to constitute to "gross selling price." (Emphasis supplied) cdtech In connection thereto, please be informed that after a restudy of the above ruling, this Office finds the same devoid of legal basis. It is a well-settled ruled in statutory construction that when there is a conflict between two provisions of law, that which is special must prevail over that which is general in character and effect. (Philippines Trust Co., vs. Macuan, 54 Phil. 655; Tan Liao vs. American President Lines, 98 Phil. 203; Baga vs. PNB, 99 Phil. 889) It is to be noted that Section 127(b) of the Tax Code as amended applies in general to domestic products and excludes the value-added tax in the determination of the gross selling price, which is the tax base for purposes of the imposition of ad valorem tax. On the other hand, the last paragraph of Section 142 of the same Code which includes the value-added tax in the computation of the ad valorem tax , refers specifically to cigars and cigarettes only. It does not include/apply to any other articles or goods subject to the ad valorem tax. Accordingly, Section 142 being a specific provision applicable to cigar and cigarettes must perforce prevail over Section 127(b), a general provision of law insofar as the imposition of the ad valorem tax on cigar and cigarettes is concerned. Moreover, the phrase "unless otherwise provided" in Section 127 (b) purports of exceptions to the general rule contained therein, such as that of Section 142, last paragraph thereof which explicitly provides that in the case of cigarettes, the tax base for purposes of the ad valorem tax shall include, among others, the value-added tax. In view thereof, BIR Ruling No. 473-88 dated October 4, 1988 has to be, as it is hereby revoked. The value-added tax should be included in the determination of the gross selling price which is the tax base for purposes of the computation of the 15% ad valorem tax on native cigarettes. cdt Very truly yours, (SGD.) JOSE U. ONG Commissioner