Applicability of VAT on Coco Shells and Husks

August 3, 1988 BIR RULING NO. 367-88 103 (a) 000-00 367-88 Gentlemen : This refers to your letter dated June 14 and June 20, 1988 stating that you are both VAT and BOI-registered domestic producer engaged in the production and sale of coconut shells and husks which are used as biomass fuel for manufacturing firms/plants as supplement for gas and electric fuel. Based on the foregoing facts, you request for a ruling on the applicability of VAT on coco shells and husks sold to you by the farmers and upon your sale of the same to the end-users after they are chipped or cracked. In reply, please be informed that the sale to you of coco shells and husks by the farmers is sale by the primary producer or owner of land where the same are produced; hence, the same are exempt from VAT pursuant to Section 103(a) of the Tax Code, as amended by Executive Order No. 273. However, after said coco shells and husks are chipped or cracked and sold by you to the end-users, they are subject to VAT pursuant to the same Section of the Tax Code because they are no longer sold by the primary producer or owner of the land where the same are produced. You are still subject to the VAT on your sale of said coco shells and husks despite your registration as a BOI registered enterprise under the Omnibus Investments Code of 1987, since said investments law does not grant you exemption from said tax. There is no legal basis for a VAT-exempt person to claim an input VAT on his purchases from VAT-registered firms. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner