VAT Ruling No. 060-02

September 16, 2002 VAT RULING NO. 060-02 Section 109 (d) VAT Ruling No. 028-98 Litogo Co., Inc. 404 BPI Building, 150 Plaza Cervantes St. 1006 Binondo, Metro Manila Attention: Mr. R.G. Tong General Manager Gentlemen : This refers to your letter dated May 15, 2002 requesting exemption from the Value Added Tax (VAT), your importation of Kem Curb. It is represented that Kem Curb Dry is a 50% Free Propionic Acid based on verniculite; that its purpose is to inhibit growth and proliferation of toxins and bacteria brought about by moulds and yeast notably from cereal-rich sources of grains such as corn, which in turn is made into poultry and hog feeds; and that it is classified as a feed additive solely for use in animal feeds manufacturing by the Bureau of Animal Industry. 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 word '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 word 'feed additives' and 'feed supplements' were not expressly mentioned in the law they are within the purview of the term 'feed ingredients'. It is significant to note that since the manufacture, importation, sale or distribution of feeds or feeding stuff require a 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 on 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. Since the Bureau of Animal Industry has classified Kem Curb Dry as ingredients in the manufacture of feeds, your importation of the said articles is exempt from the payment VAT. Accordingly, this ruling shall serve as authority of the Bureau of Customs to release the above importation, which shall be in lieu of the issuance of the Application to Release Imported Goods (ATRIG). This ruling is being issued on the basis of the facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group