Computation of VAT

June 28, 1988 BIR RULING NO. 272-88 99 000-00 272-88 S i r : This refers to your letter dated February 29, 1988 requesting confirmation of the correct computation of the VAT in the following examples showing the granting of discount due to prompt payment: CASE I Price P100.00 per case VAT 10.00 Acquisition cost P110.00 per case Less 2% discount (for prompt payment) 2.20 Payable to supplier P107.80 per case CASE II Price P100.00 per case VAT 10.00 Acquisition cost P110.00 per case 2% prompt payment discount is applied to price of P100.00 per case or 2.00 Price P100.00 per case 2% discount 2.00 Net amount P98.00 per case Add VAT 10.00 Payable to supplier P108.00 per case In reply, please be informed that Case No. II, as illustrated above is correct. This is premised on the fact that the discount should be based on the gross selling price. The value-added tax cannot be discounted because this kind of discount is not deductible from the selling price, pursuant to Section 6(c)(A) of Revenue Regulations No. 5-87.For VAT purposes, the 10% VAT shall be computed without considering the discount. cdt Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner