VAT Ruling No. 021-02

April 2, 2002 VAT RULING NO. 021-02 Section 109 (c) VAT Ruling No. 072-99 Davao City Saltiodization Task Force Monteverde Petron Station Tomas Monteverde cor. Bruno Gempesaw Sts. 8000 Davao City Attention: Mr. Sergio Y. Haw Chairman Gentlemen : This refers to your letter dated April 16, 2001 requesting for a ruling as to whether the importation of food-grade iodized salt and subsequent marketing of the same after it has undergone simple process is covered by or exempt from the Value Added Tax (VAT) under Section 109 (c) of the 1997 Tax Code. It is represented that the Davao City Salt Iodization Task Force is a banner group composed of various non-governmental organizations with the common objective of eliminating the pandemic incidence of Iodine Deficiency in Davao City and its neighboring provinces; that Iodine deficiency results to various illnesses such as goiter, mental retardation, physical and mental defects, and cretinism; that the campaign against iodine deficiency was spearheaded by the Kiwanis International; that Republic Act No. 8172, entitled "An Act Promoting Salt Iodization Nationwide", requires all producers/manufacturers of food grade salt to iodize the salt that they produce, manufacture, import, trade or distribute; that the imported food grade salt is being mixed and sprayed with fortificants for marketing thereafter; that either of the following methods may be used in the iodization process: 1. Dry mixing, if salt is in powdered form; 2. Drip feeding or spray mixing, if salt is in crystal form; 3. Submersion, if salt crystal is in iodated brine. and that the products for domestic marketing could be considered as iodized salt in their original state, the importation of which is considered as VAT exempt under Section 109 (c) of the 1997 Tax Code. In reply, please be advised that Section 109 (c) of the 1997 Tax Code provides: "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." "Products classified under this paragraph and paragraph (a) 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. Polished and/or husked rice, corn grits, raw cane sugar and molasses, and ordinary salt shall be considered in their original state;" On the basis of the process applied, iodized salt is no longer in its original state, as it has already been enriched with iodine. Neither does it fall under the definition of mineral products which is defined to mean things produced and prepared in a marketable state by simple treatment processes such as washing or drying, but without undergoing any chemical change or process or manufacturing. (Sec. 151(B)(3), 1997 Tax Code) Such being the case, your importation of Iodized Salt is subject to the 10% value-added tax prescribed under Section 107(A) of the 1997 Tax Code. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group