BIR Ruling [UN-407-95]

November 17, 1995 BIR RULING [UN-407-95] 6th Indorsement Returned to the Regional Director, Revenue Region No. 13, Central Visayas, Cebu City, the entire docket bearing on the application for VAT refund of Ferruci Fashion Trading Corporation, A.. Seno Street, Banilad, Mandaue City, Cebu, covering the period from January 1 to December 31, 1993. cdta Records show that on July 7, 1993, Ferruci Fashion Trading Corporation (Ferruci) and Primary Structures Corporation entered into a Contract for Construction by Administration involving the construction of a building at Banilad, Mandaue City, whereby the latter as Administrator (Builder) "will supply all labor and service, furnish all tools and equipment requisition and purchase for the owner the necessary materials for the satisfactory performance of all works in connection with the construction of the proposed project as per plans and specifications prepared by the Office of Architect Stephen C.U. Lien and other conditions and Agenda agreed upon with the owner pertinent thereto." Virtually, the above contract is a supply of both services and materials. Since Builder purchased the materials and which are invoiced in its own name, it is the party which generated the input tax credit, and consequently, the proper party who should apply for tax refund/tax credit certificates pursuant to Section 21 (a) of Revenue Regulations No. 5-87, stating that value-added tax, whether indicated as a separate item or not in the "VAT invoice, shall be allowed as input tax credits to those liable to value-added tax. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters. A VAT-registered person may apply for the issuance of a tax credit certificate or refund of taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. In the instant case, Builder to whom the VAT invoice of the VAT-registered seller-supplier was issued shall be the one entitled to claim the input tax thereon as tax credit/tax refund to the exclusion of Ferruci. Accordingly, the latter's request for refund /tax credit of the VAT on the builder's purchases of construction materials is hereby denied for lack of legal basis. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue