An Enterprise Registered Under Kalakalan 20 is Only Exempt from Taxes for which It is Directly Liable

November 6, 1991 BIR RULING NO. 234-91 24 000-00 234-91 Gentlemen : This refers to your letter dated July 3, 1991 requesting clarification regarding the exemption of enterprises registered under RA 6978 from the 10% value-added tax being passed on by suppliers of raw materials. You are probably referring to RA 6810 otherwise known as "Kalakalan 20" because RA 6978 refers to Rural Irrigation Development while the Magna Carta for Small Enterprise is Republic Act No. 6977 but the same does not contain any tax exemption provisions in favor of small enterprise. At any rate, under Kalakalan 20 a registered CBBE is only exempt from taxes for which it is directly liable. When the tax is merely added to the cost of goods purchased, it is no longer a tax but an additional cost which the purchaser has to pay to obtain the goods. (Philippine Acetylene vs. Comm., 20 SCRA 1056) In other words, a CBBE like you is exempt from the value-added tax only on its sale of goods and services but not on its purchases of raw materials. Accordingly, you can not claim for a refund of the value-added tax being passed on to you by your suppliers of raw materials. Very truly yours, (SGD.) JOSE U. ONG Commissioner