VAT Ruling No. 006-89

January 19, 1989 VAT RULING NO. 006-89 Atty. Juan C. Villanueva Revenue District Officer Revenue District No. 39 Bureau of Internal Revenue Lucena City Dear Sir : This has reference to your letter dated July 12, 1988 requesting for clarification on queries submitted to you by owners of different oil mills under the jurisdiction of your Revenue District, to wit: LLcd 1. Is the sale of copra cake which is a by-product of copra when sold to feedmillers, subject to the value-added tax (VAT)? 2. If the 3% millers tax is paid upon removal from place of production to the stock farm, will the inventory of crude oil as of Dec. 31, 1987 be entitled to the 8% imputed input tax on inventory? 3. A miller is buying crude coconut oil intended for resale without undergoing further processing, is the inventory of crude oil as of Dec. 31, 1987 entitled to the 8% imputed input tax on inventory, considering that the 3% millers tax has been paid? 4. If the answer to Nos. 2 and 3 is NO, can they claim the 3% millers tax paid as tax credit against VAT? In reply, please be informed of the following: 1. The sale of copra cake which is a by-product of copra is subject to VAT pursuant to VAT Ruling No. 207-88, a copy which is hereto attached. 2. The 8% presumptive input tax is intended to recognize the sales tax component of the goods which are on hand as of December 31, 1987. Since coconut crude oil was not subject to sales tax but to the miller's tax before Executive Order No. 273, its inventory value as of December 31, 1987 is not entitled to the 8% presumptive input tax. 3. If the crude coconut oil is purchased by the miller and intended for resale without undergoing further processing, its inventory value as of December 31, 1987, is not entitled to the 8% presumptive input tax pursuant to Section 26(b) (2) of the Tax Code, as amended by Executive Order No. 273. 4. The 3% millers' tax cannot be used as an input tax creditable against the output VAT because pursuant to Section 104(a) of the Tax Code, as amended by Executive Order No 273, only input VAT on purchases of goods and services may be credited against the output VAT. casia Please be guided accordingly. Very truly yours, EUFRACIO D. SANTOS Deputy Commissioner