VAT Ruling No. 025-00

July 28, 2000 VAT RULING NO. 025-00 109 (k) 000-00 Hon. Edgardo J. Angara Secretary Department of Agriculture Elliptical Road, Diliman 1100 Quezon City Dear Secretary Angara : This refers to your letter dated 01 March 2000 requesting for the reconsideration of BIR Ruling No. 151-99 dated 23 September 1999, where it was ruled that ". . . the process of dressing chicken for others for a fee, remuneration, or reconsideration is subject to the 10% VAT pursuant to Section 108 of the Tax Code of 1997. . . ." Section 109(k) of the Tax Code of 1997, (formerly Section 103(k), old NIRC), provides that "Services by agricultural contract growers . . ." shall be exempt from the 10% value-added tax (VAT). This law is implemented by Sec. 4.103.1(B)(k) of Revenue Regulations No. 7-95, as amended by Section 4 of Revenue Regulations No. 6-97, which provides that the term "agricultural contract growers" shall "refer to those persons producing for others poultry, livestock or other agricultural and marine food products in their original state. The Term 'agricultural contract growers' shall also include reforestation contractors pursuant to the Government Reforestation Program." In BIR Ruling No. 127-95 dated August 25, 1995, in the case of San Miguel Foods, Inc., it had been held that "the process of dressing chicken for others for a fee, remuneration or consideration" is embraced under the provisions of the aforesaid law, and hence exempt from VAT. This same conclusion was later reiterated in VAT Ruling No. 061-97 dated October 10, 1997. aCTADI A more searching review of the aforequoted provisions of law and regulations shows no compelling legal justification to support the reversal or even a modification of BIR Ruling No. 127-95 and VAT Ruling No. 061-97. In view of the foregoing, the questioned BIR Ruling No. 151-99 is hereby reconsidered and withdrawn and the dressing of chicken remains exempt from VAT. Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue