VAT Imposed on Cassava Starch

June 16, 1989 BIR RULING NO. 128-89 103 (b) 300-88 128-89 Gentlemen : This refers to VAT Ruling No. 569-88 dated December 22, 1988 holding that cassava starch is exempt from the value-added tax on the ground that cassava tuber when milled into cassava starch retains its original state. cdi In connection therewith, please be informed that a study of the process involved in the conversion of cassava tubers into cassava starch reveals that the same is not a mere simple process of preparation or preservation for the market, such as freezing, drying, salting, smoking or stripping as provided in Section 103(b) of the Tax Code, as amended by Executive Order No. 273. Rather, the conversion involves the process of manufacturing, hence, cassava starch is really subject to VAT. It is a cardinal rule in taxation that exemptions should be construed strictissimi juris because it is highly disfavored in law, and he who claims an exemption must be able to justify his claim by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon vague implications (Asiatic Petroleum Co., vs. Llanes, 49 Phil. 466) In view thereof, consistent with the rule in favor of the taxing authority, VAT Ruling No. 569-88 dated December 22, 1988 is hereby revoked. Accordingly, BIR Ruling No. 309-88 issued to your counsel, Law Offices of Valdes, Ereso, Polido and Associates, holding that cassava starch is subject to VAT is hereby maintained. cdt Very truly yours, (SGD.) JOSE U. ONG Commissioner