Tax Exemption Granted to MDEC

March 18, 1987 BIR RULING NO. 078-87 167 (d) 000-00 078-87 M a d a m : This refers to your letter dated November 21, 1986 stating that your client, Midas Diversified Export Corporation (MDEC) is primarily engaged in the manufacture and export of garments, specifically jeans and shorts; that 100% of its production is exported, conducted in a direct manner; that MDEC is registered with the BOI as an export producer under Republic Act No. 6135 with Registry No. 73-339 dated November 1973; that from the start of its operation, raw materials have been imported through opening of Letters of Credit with the use of Trust Receipts; that when the Central Bank disallowed the opening of Letters of Credit through Trust Receipts but would rather exchange them for cash only, MDEC entered into an agreement with the buyers for the latter to supply the fabrics on consignment basis while the accessories and other raw materials forming part of the finished garments are purchased locally, that the buyers are no longer charged of the Total FOB Value but only on the CMT Value; and that you had been exempted from the payment of sales tax pursuant to Section 202(s) of the Tax Code then in force. Based on the foregoing facts, you now request a ruling as to whether MDEC is still exempted from payment of the sales tax. In reply, please be informed that your client is exempt from the sales tax on the garments it manufactures and exports, pursuant to Section 167(d) of the Tax Code, as amended by Executive Order No. 36. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner