VAT Ruling No. 007-01

February 16, 2001 VAT RULING NO. 007-01 Sec. 109 (c) 000-00 Atty . Rolando E . Yebes District Collector of Customs District Port of Cebu Bureau of Customs Cebu City Sir : This refers to your letter dated September 30, 1999 seeking clarification as to whether or not the importation of frozen boneless briskets and frozen boneless buffalo meat or forequarter meat is exempt from value-added tax. In particular, you would now like to confirm whether the removal of the bone from the meat carcass is itself a simple process so that the meat is considered to be in its original state and therefore its importation entitled to VAT exemption. In reply, please be informed that the "sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor" is exempt from VAT. (Section 109(c) Tax Code of 1997) The term "original state" is amplified to mean as follows: "Meat, fruit, fish, vegetable and other agricultural and marine food products shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping, including those using advanced technological means of packaging, such as shrink wrapping in plastics, vacuum packing, tetra-pack, and other similar packaging method . " (Section 4.103-1(B), RR 7-95) In a related ruling pursuant to the above provisions of law and regulations, this Office has had the occasion to hold that "ground beef, chopped and frozen, qualifies for exemption from VAT" as agricultural food product in its original state. (VAT Ruling No. 064 88) Verily, deboning is a simple process which does not alter the substance of the thing, much less transform the meat into another distinct product altogether. What would be outside of the scope of the term "simple process" is the kind of physical or chemical process which would alter the exterior texture or form or inner substance of a product in such a manner as to prepare it for special use to which it could not have been put in its original form or condition. EcAISC In the light of the foregoing, this Office is of the opinion and so holds that the importation of "frozen boneless briskets and frozen boneless buffalo meat or forequarter meat" is within the purview of the definition of a food product in its original state, hence, exempt from the 10% Value-Added Tax. Very truly yours, (SGD.) RENE G. BAEZ Commissioner of Internal Revenue