Unnumbered BIR Ruling

April 30, 1998 Infanta Farms, Inc. P.O. BOX 91 Kidapawan, North Cotabato Attention: Mr . Kurt Winiger Gentlemen : This refers to your request for reconsideration of the assessment requiring you to pay the sum of P204,312.38 as deficiency value-added tax for the year 1988, inclusive of surcharges and interests, covered by Assessment Notice No. 85-0-000158 dated May 2, 1989. cdtech The request is based on the contention that raw rubber or coagulum in dried form which your company produced is an agricultural non-food product still in its original state, hence, exempt from the value-added tax pursuant to Section 103(a) of the Tax Code, as amended by Executive Order No. 273. In reply, please be informed that the sale of rubber in either crumb/creped or baled/sheet form, the rubber having already undergone a manufacturing process and, therefore, no longer retaining its original state is subject to the value-added tax (VAT Ruling Nos. 415-88 and 416-88). It was ascertained by the examiners of the then Revenue District Office No. 85, Kidapawan, Cotabato, that the creped rubber, baled raw rubber and/or rubber sheet you produced have undergone the following manufacturing process: 1) Rubber latex in liquid is placed in the coagulating tank; 2) Glacial acetic acid is mixed to the latex in proper preparation in order to allow latex to coagulate, then exposed to the air; 3) Once coagulated, this latex is pressed against the milling machine in order to extract water content; 4) After the milling process it is dried either by natural process or through electrical and fuel consuming device; and 5) Once dried, it is baled or formed as rubber sheet which is ready for market as raw rubber. Based on said findings, your rubber products are no longer in their original state. Such being the case, the sale of the said products is subject to the 10% value-added tax. In view thereof, your request for reconsideration is hereby denied. Accordingly, you are hereby requested to pay the amount of P204,312.38 as deficiency value-added tax for the year 1988 plus the penalties that accrued thereon, to the Revenue District Office nearest your place of business within 15 days from your receipt hereof in order that this case may be closed and terminated. This constitutes the final decision of this Office on the matter. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue