Imported Sodium Sulfite Used as Raw Materials in the Manufacture of Tellurium Dioxide and Selenium is Subject to 20% Advance Sales Tax

November 6, 1987 BIR RULING NO. 352-87 111 000-00 352-87 Gentlemen : This refers to your letters dated August 17, 1987 and September 15, 1987, in effect, requesting a ruling that your importation of Sodium Sulfite is exempt from advance sales tax, pursuant to Presidential Decree No. 1789, as amended by B.P. Blg. 391, otherwise known as the Omnibus Investments Code. It is represented that you are registered with the Board of Investments as an export producer of Tellurium Dioxide and Elemental Selenium under BOI Certificate of Registration Nos. 84-749 and 85-981 respectively; that in the manufacture of both products, you import sodium sulfite on which you pay 20% advance sales tax; and that you export all of your products which are used by foreign manufacturers as raw materials in the manufacture of various products. In reply, please be informed that pursuant to the provision of B.P. Blg. 391, amending P.D. No. 1789, under which your firm is registered as a new export producer of Tellurium Dioxide and Selenium (Elemental) classified as pioneer and non-pioneer products respectively, the system of tax crediting of the taxes paid on raw materials has been adopted replacing the outright tax exemption scheme thereof before the amendment. Pertinent portion of Section 48 of P.D. No. 1789, as amended by B.P. Blg. 391 is quoted hereunder: "48. Incentives for Registered New or Expanding Export Producer . All registered export producers, whether pioneer or non-pioneer, shall be granted the following incentives to the extent engaged in new capacity or expansion of capacity in a preferred area of investment: "(i) Tax Credit for Taxes and Duties on Raw Materials . Every registered export producer shall enjoy a tax credit equivalent to the sales, compensating and specific taxes and duties paid on the supplies, raw materials. . ." adc In view of the foregoing amendment, your importation of Sodium Sulfite which is used as raw materials in the manufacture of Tellurium Dioxide and Selenium (Elemental) is subject to 20% advance sales tax pursuant to Section 162(c) in relation to Section 163(4) of the Tax Code. However, you are entitled to claim tax credit to the full extent of the advance sales taxes paid pursuant to the above-quoted provision of P.D. 1789, as amended by B.P. Blg. 391. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner