VAT Ruling No. 029-92

March 11, 1992 VAT RULING NO. 029-92 NIRC Sec. 103 (a) Precedent Ruling 416-88 2nd Indorsement January 7, 1992 Respectfully returned to the Honorable Secretary Senen C. Bacani, Department of Agriculture, and Secretary Peter Garrucho, Department of Trade and Industry, through Asst. Secretary Antonio P. Balicena, Revenue Operation Group, Department of Finance, Manila, their joint recommendations that "crumb and crepe rubber" be considered exempted from the 10% value added tax (VAT). Please be informed that, under Section 103(a), NIRC, sale of nonfood agricultural , marine and forest products may be exempted from the 10% VAT provided sold in their original state and the seller is its primary producer or the owner of the land where the same are produced. The same may still 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, smoking, or stripping. In VAT RULING Nos. 415-88 and 416-88 this Office ruled that "Baled raw rubber and/or rubber sheet, crepe or crumb rubber" do not qualify as nonfood agricultural products in their original state hence, the sale thereof may not be exempted from the 10% VAT under Section 103(a), NIRC, because the same have already undergone the following processes: "Rubber latex in liquid is placed in the coagulating tank, Then, glacial acetic acid is mixed therewith in proper preparation in order that the latex may coagulate. Then, exposed to air. The coagulated latex is milled through a milling machine in order to extract the water content. After milling, it is dried either through a natural process or through electrical and fuel consuming device. Then, the same is baled or formed into rubber sheet, rubber crepe or crumb rubber ." Since the extent of processes used to produce rubber sheet, rubber crepe or crumb rubber do not fall within the term "simple process" as defined by law, this Office regrets that these products may not be ruled as VAT-exempt for purposes of Section 103(a), NIRC. Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue