Request for Exemption from Payment of Specific Tax on Certain Locally-Purchased Products

March 8, 1984 BIR RULING NO. 057-84 153-c-019-83-057-84 Gentlemen : This refers to your letter dated October 18, 1983 requesting exemption from the payment of specific tax on the following products, viz: 1. Refinery Gas 11,196,000 liters 2. Industrial Diesel Oil 966,000 liters 3. Industrial Fuel Oil 2,461,000 liters TOTAL 14,623,000 liters ========== which you will purchase locally from Petrophil Corporation for the account of Planters Products, Inc. It is represented that the aforesaid 14,623,000 liters of refinery gas, industrial diesel oil and industrial fuel oil will be used exclusively by Planters Products, Inc. in the manufacture of ammonia which will be used for the production of NP/NPK fertilizer. Moreover, investigation conducted by the Gasoline & Miscellaneous Tax Division disclosed that refinery gas, Naphtha, industrial diesel oil and industrial fuel oil are fertilizer inputs, the same being used in the manufacture of fertilizer. In reply, please be informed that, Section 6 paragraph II-5 of Presidential Decree No. 1144, empowers you: "To import fertilizer and fertilizer inputs exempt from customs duties, compensating and sales tax and all other taxes, and to purchase Naphtha locally free from specific taxes and the corresponding duty on the imported crude and sell or convey such fertilizer or fertilizer input to any individual association, or corporation likewise exempt from the payment of customs duties and all other taxes." From the above-quoted provision, it is clear that you are also authorized to purchase the said fertilizer inputs locally, free from the payment of the specific tax. This conclusion finds support in the Whereas Clause of P.D. No. 517 which contains a provision similar to the above-quoted provisions, the purpose of which is to place on equal footing importations and local purchases, of fertilizer and fertilizer inputs insofar as their tax treatment is concerned thereby enabling domestic products and suppliers to compete effectively with foreign suppliers resulting in savings in foreign exchange and other inherent benefits to the country. Moreover, if the local purchase of fertilizer inputs is not allowed tax-free, that Authority may not be able to sell the same tax-free to any buyer, which runs counter to the above-quoted provisions. Finally, in a ruling rendered by the Acting Minister of Finance dated April 12, 1983 it was held that refinery gas being a substitute to Naphtha and diesel oil and industrial fuel oil being basic inputs to the manufacture of fertilizer are likewise exempt from the payment of specific tax. In view thereof, your request is hereby granted. Accordingly, you may withdraw from Petrophil Corporation the above-mentioned quantities of refinery gas, industrial diesel oil and industrial fuel oil, free from the payment of the specific tax imposed in Section 153(c) of the Tax Code of 1977, as amended. However, the conditions set forth in Revenue Regulations No. 13-77 regarding the recording and reporting of deliveries of petroleum products to tax exempt entities should be complied with. cdta Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner