Applicability of VAT on Purchases Made by HDMF for Its Operations

June 6, 1988 BIR RULING NO. 243-88 99 000-00 243-88 Gentlemen : This refers to your letter dated May 9, 1988 requesting for a ruling regarding the applicability of VAT on purchases made by HDMF for its operations. You contended that HDMF is a government financial institution enjoying tax exemption but with the implementation of the VAT, the suppliers have been charging you with the corresponding 10% value-added tax. In reply, please be informed that under Section 99 of the Tax Code as amended by Executive Order No. 273, the persons liable for the payment of the value-added tax are not the buyers/purchasers but the sellers/importers of goods and those performing services for a fee. However, since the value-added tax is an indirect tax, it can be shifted to the customer. Once shifted to the customer as addition to the cost of goods sold, it is no longer a tax but an additional cost which the customer has to pay in order to obtain the goods. (Philippine Acetylene Co. vs. Commissioner of Internal Revenue, G.R. No. L-19707, August 17, 1967) The shifting of the value-added tax to you does not make you the person directly liable therefor; hence, you cannot invoke your tax exemption privilege to avoid the passing on or shifting of the VAT to you. (Unnumbered BIR Ruling dated April 30, 1988) cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner