VAT Ruling No. 015-90

January 22, 1990 VAT RULING NO. 015-90 National Food Authority No. 101 E. Rodriguez Sr. Ave. Quezon City Attention: Mr . Pelayo J . Gabaldon Administrator Gentlemen : This refers to your letter dated April 20, 1989, in relation to a letter from Mr. Joaquin G. Soliman, President, Confederation of Filipino Rice and Corn Assn., Inc., dated March 3, 1989, addressed to this Bureau, bearing on his request for a reconsideration of BIR RULING NO. 291-88 dated June 29, 1988, viz.: that the sale of "corn germ" is subject to 10% value added tax. In reply, please be informed that agricultural food products, when milled, do not anymore qualify as "agricultural food products in their original state". The only statutory exceptions to this rule are: polished and/or husked rice, corn grits and raw cane sugar (Sec. 103(b), NIRC, as amended). Thus, in BIR RULING NO. 151-88, dated April 19, 1988, it was held that "banana meal" does not qualify as agricultural food product in its original state since it has already undergone the process of milling. Since "corn germ" is admittedly a product of milling process and considering that it is not included in the said statutory exceptions of certain milled products (i.e., limited to "polished and/or husked rice, corn grits and raw cane sugar"), it follows that its sale cannot be exempted from the 10% VAT under the provisions of Section 103(b), of the Tax Code, as amended. Such being the case, the sale thereof is subject to 10% VAT pursuant to Section 100(a) of the same Code. The fact that "corn germ" is a by-product in milling corn cannot be considered for purposes of VAT exemption because the 10% VAT, in general, applies to sale of goods, i.e., without distinction as to whether or not it is a mere by-product in the production process (Sec. 100(a), NIRC, on sale of goods and Sec. 2(p), Rev. Regs. No. 5-87 on meaning of the term "goods"). In view thereof, this Office regrets that your said request for reconsideration of BIR RULING NO. 291-88 cannot be granted for lack of legal basis. cdta Very truly yours, JOSE U. ONG Commissioner of Internal Revenue