VAT Ruling No. 054-02

September 12, 2002 VAT RULING NO. 054-02 109 (m); 7 VAT Ruling #61-2001 Senining, Belcia & Atup Law Offices M. Lhuillier Bldg., Benedicto Street North Reclamation Area, Cebu City Attention: Atty. Bayani S. Atup Partner Gentlemen : This refers to your letter dated February 9, 2002, requesting for a ruling whether your client, GILLIMAC INFORMATION TECHNOLOGY CENTER, INC. (GITECH) is exempted from value-added tax (VAT) under Section 109(m) of the Tax Code of 1997; and whether the ruling issued by the Regional Director of Revenue Region No. 13 (Cebu) is a violation of Sec. 7 of the same Tax Code. It is represented that GITECH is a stock corporation engaged in providing vocational education particularly computer training; that, although it is not accredited by the Department of Education, Culture and Sports (DECS) nor by the Commission on Higher Education (CHED), it is nonetheless accredited by the Technical Education and Skills Development Authority (TESDA); and that arguably such accreditation by TESDA is tantamount to an accreditation by the DECS for VAT-exemption purposes. It is further alleged that the said Regional Director issued two rulings dated October 17, 2001, and January 25, 2002, respectively, in effect "authorizing the Revenue District Office No. 82 (Cebu City-South) to conduct an examination of your client's books of accounts and eventually make the assessment on the amount of the gross receipts arising from its operations as an educational center taking into account that only educational institutions duly accredited by DECS and CHED are exempted from the imposition of VAT". In reply, please be informed that it is clear under Sec. 109(m) of the Tax Code of 1997 that educational services rendered by a private educational institution shall be exempted from VAT if it is duly accredited by DECS or by CHED. No law explicitly provides that an accreditation by TESDA is tantamount to an accreditation by DECS or by CHED. The provisions of Sec. 7 of Republic Act No. 7796 (TESDA Act of 1994) mandating the inclusion of the Secretary of Education, Culture and Sports as Co-Chairperson of the TESDA Board does not operate as a delegation of an authority to accredit private educational institutions to the TESDA for VAT-exemption purposes. Therefore, the education services rendered by GITECH shall be subject to VAT. With respect to the ruling issued by the said Regional Director, what Sec. 7 of the said Tax Code prohibits is the delegation of the power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau of Internal Revenue. The said ruling does not fall under the said prohibition. Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group