Non-exemption of Industrial Users from the Advance Payment of VAT on Their Withdrawals of Refined Sugar

August 20, 1991 BIR RULING NO. 157-91 19 (d) 000-00 157-91 Gentlemen : This refers to VAT Ruling dated June 17, 1991 that an industrial user, like you, is exempt from the advance payment of VAT on its withdrawals of refined sugar required under Revenue Regulations No. 7-89; but that, the tolling fee for the milling of the raw sugar into refined sugar shall be subject to the payment of VAT by the sugar refinery. In connection therewith, please be informed that after a restudy of the aforementioned ruling, this Office finds that the same violates the "uniformity clause" of the Constitution; and that it is contrary to the clear intendment of Revenue Regulations No. 7-89, expressed in Section 4 thereof, providing: "SEC. 4. Prohibition of Withdrawal . The proprietor or operator of a sugar refinery shall not allow any withdrawal of refined sugar from its premises without prior advance payments of value-added tax made by the owner/seller thereof." a collection scheme whereby the advance payment of VAT shall be required of/on any and all withdrawals made by either the owners or sellers thereof, regardless of the character of the user . Moreover, under Section 104 of the Tax Code, input tax on raw materials is tax creditable against the output tax, if the raw materials are made to form part of the finished product; hence, there is really no cogent reason for the exclusion of industrial users from the applicability of Revenue Regulations No. 7-89. This revokes/modifies VAT Ruling dated June 17, 1991 insofar as it exempts industrial users, like you, from the advance payment of VAT on their withdrawals of refined sugar. aisadc Very truly yours, (SGD.) JOSE U. ONG Commissioner