VAT Ruling No. 019-89

February 3, 1989 VAT RULING NO. 019-89 National Agricultural and Fishery Council Diliman, Quezon City Attention: Mr . Tomas B . Lopez, Jr . Asst . Executive Director for Finance and Administrative Service Gentlemen : This refers to your letter dated August 12, 1988 stating that in 1987, you have made an importation of agricultural pesticides under a Japanese Government Grant for increased food production; that said importation was consigned to you and was sold and directly delivered to Atlas after being released from customs custody; that said importation is allowed to be released from customs custody without the prior payment of the advance sales tax (now value-added tax) because of the authority for tax deferment authorized by the Secretary of Finance; that you also allowed the same importation to be sold and delivered to Atlas without prepayment of the cost of goods and the advance sales tax; and that you allowed Atlas to defer payment of both the cost of goods and taxes and duties due thereon for 180 days from the date of arrival of the importation. cdta Based on the foregoing facts, you now request for a clarification whether Atlas could still avail of the tax credit if both the advance sales tax (now value-added tax) and the cost of the goods will be paid in 1988. In reply, please be informed that under the foregoing facts, you are the importer and the first seller of the goods; hence, you are the entity directly liable to the payment of the advance sales tax (now value-added tax) as gleaned from the approval of your application for deferment of advance sales tax (now value-added tax) payment on your importation of pesticides, viz: "It is understood that the National Agricultural and Fishery Council shall be billed for the amount of duties, taxes, fees and other charges on the above shipment's immediately upon release thereof and steps should be taken to effect collection of the amount corresponding to the said liabilities." Pursuant to the last paragraph of Stipulation III in your contract with Atlas stating: "In addition to the contract price, duties and taxes shall be borne by the buyer which shall be based on the Import Entry and Internal Revenue Declaration of Shipment, payable to the account of NAFC." Atlas shall directly pay the advance sales tax (now value-added tax) to the Bureau of Internal Revenue which shall issue the official receipt to Atlas in the following manner: "Atlas for the account of NAFC" If the same importation shall have formed part of Atlas' inventory of goods on December 31, 1987, Atlas cannot claim a transitional presumptive input tax credit in 1988 because pesticides are exempt products. Section 26(b) (3) of Revenue Regulations No. 5-87, which allows an 8% presumptive input tax credit equivalent to 8% of the value of the goods unused as of December 31, 1987, applies only to goods purchased with the object of resale in their present condition, and subjected to the value-added tax of 10%. Moreover, the presumptive input tax is allowed only to a VAT-registered person with respect to his registered activities. If at the same time, he is engaged in non-VAT activities such as sale of pesticides (which is not voluntarily registered), the inventories corresponding to such non-registered activity shall not enjoy any presumptive input tax credit. Finally, the imposition of the 25% surcharge and other penalties are hereby waived in line with the policy of liberality in the initial implementation of the VAT law and in accordance with BIR Ruling No. 282-000-00-099-87. LLpr Very truly yours, VICTOR A. DEOFERIO, JR. Deputy Commissioner