VAT Ruling No. 052-03

December 5, 2003 VAT RULING NO. 052-03 Section 109 (c) VAT Ruling No. 028-98 Sytengco Enterprises Corporation No. 10 Resthaven Street, SFDM Quezon City Attention: Mr. Renan M. Del Rosario Senior Vice President Gentlemen : This refers to your letter dated August 26, 2002 requesting for a clarification as to the reason why despite the certification issued by the Bureau of Animal Industry that Tylosin Tartrate, a veterinary antibacterial, is a feed additive-antibiotic, your importation was imposed the 10% value added tax. It is represented that a 10% VAT was imposed on your latest importation of Tylosin Tartrate, a veterinary antibiotic, despite your presentation of an import permit from the Bureau of Animal Industry dated July 24, 2002; that it is your opinion that the certification in the nature and composition of the commodities/items as stated in the registration and import permit issued by the Bureau of Animal Industry will govern the classification of the said items for purposes of VAT under Section 109(d) of the Tax Code of 1997 based on VAT Ruling No. 028-98 dated September 15, 1998, issued by this Office; and that in support of your request, you submitted photocopies of your import permit and certificates of product registration for our perusal. In reply, please be informed that Section 109(d) of the Tax Code of 1997 provides that sale or importation of fertilizers, seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets) shall be exempt from the value-added tax (VAT). The foregoing provision refers to three transactions as being exempted from VAT, namely: 1. Sale or importation of fertilizers, seeds, seedlings and fingerlings; 2. Sale or importation of fish, prawn, livestock and poultry feeds; and 3. Sale or importation of feed ingredients used in the manufacture of fish, prawn, livestock and poultry feeds. Item 3, clearly refers to ingredients used in the manufacture of animal feeds. And the terms `ingredients' or `feed ingredients' are defined under Republic Act No. 1556, as amended by Presidential Decree No. 7, and implemented by Administrative Order No. 35 dated September 23, 1975 as "any single article of feed or feeding stuff which enters into the composition of a ration, concentrate, or supplement." Such being the case, while the terms `feed additives' and `feed supplements' are not expressly mentioned in the law they are within the purview of term `feed ingredients'. HEDaTA It is significant to note that since the manufacture, importation, sale or distribution of feeds or feeding stuff require prior registration and permit from the Bureau of Animal Industry (BAI) under Republic Act No. 1556, as amended by Presidential Decree No. 7, the certification in the nature and composition of the commodities/items as stated in the registration and import permit issued by BAI will govern the classification of the said items for purposes of VAT under Section 109(d) of the Tax Code of 1997. Hence, if BAI classified the products/commodities as feed ingredients, even if the same is susceptible of multiple usage, it shall be exempted from VAT under the aforecited section. All others not classified as feed ingredients will be subject to VAT on its sale or importation. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspections Group