VAT Ruling No. 047-91

May 29, 1991 VAT RULING NO. 047-91 Congresswoman Hortensia L. Starke House of Representatives Constitution Hills, Quezon City Dear Congresswoman Starke : Referring to your letter dated December 5, 1990 please be informed that "Any person who, in the course of trade or business, sells, barters or exchanges goods, renders services, or engaged in similar transactions and any person who imports goods shall be subject to the Value-Added Tax. . ." (Sec. 99, NIRC) While sale of nonfood agricultural products are exempted from 10% VAT, provided, sold in their original state and provided, further, that the seller is the primary producer thereof (Sec. 103(a), ibid) and while sale of agricultural food products are exempted from 10% VAT, provided, sold in their original state (Sec. 103(b), ibid), the requisite of law, viz., sold in their original state is not, however, availing vis-a-vis "molasses". Molasses are not agricultural products in their original state . The agricultural product in its original state is the sugar cane. On the other hand, molasses are by-products when sugar cane are milled to produce sugar from the cane. While it is true that, by statutory provisions, " raw cane sugar " are considered agricultural food products in their original state (Sec. 103(b), ibid), however, molasses are not raw cane sugar but, rather, are another and distinct by-product in the milling of sugar from the cane, viz.: "Raw cane sugar refers to crystalized or solidified juice of sugarcane, distinctly brown in color resulting from the simple and primary milling process such as treating the juice with lime to remove impurities, boiling and spinning the syrup to force out the molasses. It does not include cane sugar commonly known as 'washed sugar', 'plantation white sugar' and 'blanco directo' sugar, which are, for purposes of this exemption, considered as refined sugar. Molasses and bagasse are not also covered by the exemption ." (SEC. 9(b)(2), Rev. Regs. No. 5-87, as amended by Rev. Regs. No. 5-89, promulgated October 10, 1989) Based on the said law and implementing regulations, sale of molasses is subject to the 10% VAT, pursuant to Sections 99 and 100, NIRC. cdta Very truly yours, JOSE U. ONG Commissioner of Internal Revenue