VAT Ruling No. 032-89

January 19, 1989 VAT RULING NO. 032-89 Unimer Trading Corporation Ground Floor, Phinma Bldg. 166 Salcedo St., Legaspi Village Makati, Metro Manila Attention: Mr . Ramon T . Martillano Accounting Manager S i r s : This refers to your letter dated July 22, 1988 requesting confirmation whether "bentonite", a raw material/binder used in the manufacture of ferrochrome can be considered as an export sale to be zero rated when sold to Ferrochrome Phils. Inc., (FPI) a PHIVIDEC and BOI registered firm. LLphil In reply, please be informed that on the basis of Ferrochrome's registration with PHIVIDEC, your sale of bentonite is exempt from the value-added tax by virtue of the provisions of PD 538 (creating the Phividec Industrial Authority), to wit: "Section 8. Tax Treatment of Merchandise in the Area. Any provision of law to the contrary notwithstanding, raw materials , supplies, articles . . . brought in the Area and utilized in the production, storing, packing and shipment of goods meant for foreign markets shall be exempt from customs duties, internal revenue taxes . . . Such being the case, such sale is not qualified for zero rating under Section 100 (a) (1) of the Tax Code, as amended considering that PD 538 does not provide that a sale to a Phividec registered firm is considered as an export sale. On the other hand, the sale can qualify for effective zero rating on the basis of Ferrochrome's registration with the BOI. This is subject to the condition that the raw material is sold for the manufacture of goods of a BOI registered enterprise (i.e. Ferrochrome) which exports at least 70% of its total output. In this connection, there is a need for you to file an application for zero rate subject to the conditions under section 2 of RR 2-88. Furthermore, you are hereby allowed to correct the beginning balance of the input taxes for the second quarter of 1988 by adjusting your ending balance as of April 30, 1988 by filing an amended return for the period from January to April 1988. casia Very truly yours, EUFRACIO D. SANTOS Deputy commissioner Office-in Charge