Freight and Insurance Not included in the Phrase "Other Charges" under Sec. 162 (c) of the Tax Code

October 2, 1986 BIR RULING NO. 205-86 163 000-00 205-86 Gentlemen : This refers to your letter dated September 1, 1986 requesting clarification on the following: "I. Amendments on Section 162, sub-paragraph (c) of the National Internal Revenue Code under Section 1 of Executive Order No. 36. "In the computation of percentage tax on imported articles, will freight and insurance expenses now be included under "other charges"? Amendments under Section 1 of Executive Order No. 36 does not mention inclusion of these expenses. "II. Section 2 of Executive Order No. 36, under item 2, page 4, lists of essential articles. 1. On page 5, item (k) listed as one of the essential articles is " Basic Sanitary and Plumbing Fixtures and Fittings ". The term "Basic" is very vague and need to be defined to insure correct and uniform implementation. In our sector, the term can be interpreted differently as follows: 1.a. Group of sanitary fixtures and fittings classified as medium cost models: i.e., Premium model vs. ordinary model of watercloset or gold plated faucet vs. ordinary chrome plated faucet. This is the classification of sanitary fixtures and fittings according to market segment. 1.b. This can also be interpreted as the minimum requirements that will go into a bathroom, i.e., watercloset and a lavatory, in line with this definition the following sanitary fixtures, fittings and accessories need to be clarified if these are part of the minimum requirements of a bathroom: a. bathtub b. bidet c. soapholder d. paper or tissue holder e. towel post and rail f. telephone or hand shower" In reply, please be informed as follows: I. When the articles are imported, the advance sales tax is "based on the total value used by the Bureau of Customs in determining tariff and customs duties, including customs duties and other charges." (Sec. 162(c), Tax Code). The rule of ejusdem generis provides that "where, in a statute, general words follows a designation of particular subjects or classes of persons, the meaning of the general words will ordinarily be presumed to be restricted by the particular designation, and to include only things or persons of the same kind, class or nature as those specifically enumerated." (Genato Commercial Corporation vs. CTA, et al., G.R. No. L-1172), September 29, 1958). Accordingly, under the said provision, the meaning of the phrase "other charges" is restricted by the term "customs duties". Since customs duties are revenues paid by the importer to the government for bringing foreign goods into the country, freight and insurance cannot be included within the phrase "other charges." It is noted that freight is incurred in bringing the goods into this country while insurance is incurred to indemnify the importer in case of loss of the imported articles. II. Basic sanitary and plumbing fixtures and fittings include water closet and lavatory as well as bathtub, bidet, soapholder, paper or tissue holder, towel post and rail and telephone or hand shower subject to the 10% sales tax under Section 163(2) (k) of the Tax Code, as amended by Executive Order No. 36 which took effect on August 1, 1986. It may be stated that the law imposes the same rate of tax on the plumbing fixtures regardless of their model. aisadc Very truly yours, (SGD.) ROMULO M. VILLA Acting Commissioner