VAT Ruling No. 024-91

April 17, 1991 VAT RULING NO. 024-91 Pepsi-Cola Products Philippines, Inc. P.O. Box 2023 MCC 3117 Makati, Metro Manila Attention: Atty . Lovell R . Bautista Tax Manager Gentlemen : This refers to your letter dated February 13, 1991, in effect, requesting confirmation of your opinion that as the owner/user of refined sugar you are not covered by Revenue Regulations No. 7-89 which require that the VAT in the sale of refined sugar shall be paid in advance by the owner/seller. It is represented that you are a franchised bottler of Pepsi-Cola products in the Philippines; that you purchase raw sugar from either the sugar planter or the sugar miller for conversion into refined sugar for your own use in the production of soft drinks; and that you stock raw sugar to guarantee its availability for your operation throughout the year. In reply, please be informed that pursuant to Section 103(b) of the Tax Code, raw cane sugar is considered agricultural product in its original state; hence, the sale to you by the sugar planter or miller is exempt from VAT. Consequently, since under Section 99 of the Tax Code the transaction subject to VAT is sale of goods or services, when you cause your own raw sugar to be milled into refined sugar no taxable activity had taken place; therefore, the requirement on the advance payment of VAT on the sale of refined sugar by the owners/sellers thereof through the sugar refinery as prescribed under Section 3 of Revenue Regulations No. 7-89 will not apply (VAT Ruling No. 235-90). However, the tolling fee for the milling of the raw sugar into refined sugar shall be subject to the payment of VAT by the sugar refinery. For monitoring and control purposes, it is requested that for every withdrawal of the refined sugar from the miller, you will first secure a clearance/approval from the BIR, Attention: VAT Division, National Office Building, copy of which shall be furnished the Revenue Regional Office concerned where the refinery is located. Said clearance shall indicate the quantity of 50 kilo bags of refined sugar authorized to be withdrawn without the advance payment of VAT. cdtech Very truly yours, JOSE U. ONG Commissioner of Internal Revenue