Tax Imposed on Banana Chips and Banana Powder

July 28, 1988 BIR RULING NO. 361-88 103 (b) 071-88 361-88 M a d a m : This refers to your letter dated May 26, 1988 requesting a ruling as to whether banana chips and banana powder are subject to the value-added tax (VAT). It appears that your product known as banana chips undergo a process of peeling, chopping and sun-drying with no additives used which you sell to manufacturers of banana catsup and animal feeds; and that your other product known as banana powder likewise undergo the same process and further milled, and which you also sell to manufacturers of catsup and animal feeds. In reply, please be informed that pursuant to Section 9(b)(2) of Revenue Regulations No. 5-87 implementing Section 103(b) of the Tax Code as amended by E.O. No. 273, sale or importation of agricultural and marine food products is exempt from the value-added tax in all stages of production or distribution if sold in their original state. Meat, fruit, fish, vegetables and other agricultural and marine food products shall be considered in their original state even if they have undergone the simple process of preparation or preservation for the market, such as freezing, drying, salting, smoking and stripping. Accordingly, both of the aforesaid products are exempt from the value-added tax. However, if the banana powder is packed or placed in bottles or cans and sold, the same is already considered as manufactured product (BIR Ruling No. 315-87); hence, subject to the value-added tax if their sales exceed P200,000.00 during the 12-month period. But if their sales derived from all lines of business do not exceed P200,000.00 during any 12-month period, they are exempt from the value-added tax but subject to 2% of their gross quarterly sales pursuant to Section 103(w) in relation to Section 112 of the Tax Code as amended. (BIR Ruling No. 071-88) cdt Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner