VAT Ruling No. 080-88

February 18, 1988 VAT RULING NO. 080-88 103 (b)-000-00-080-88 MEMORANDUM FOR : The Secretary of Finance This belates to the request of the National Sugar Refineries Corporation for a reconsideration of the interpretation of Section 103 of Executive Order 273. In particular, the request asks that the term "raw cane sugar" should include all kinds of sugar including what is commonly known as "refined sugar" where no process has intervened that will result in a change in the chemical makeup of the product and/or will involve the addition of another substance or procedure which in effect changes the physical characteristics of "sugar" as it is commonly known. The law (Sec. 103-b) provides that ". . . raw cane sugar shall be considered in their original state." The definition of what "raw cane sugar" is contained in Section 9(2) of Revenue Regulations No. 6-87 issued by the Office of the Department of Finance which reads as follows: "Raw cane sugar refers to the crystalized or solidified juice of sugar cane through a milling process, short of the process of being refined, without any addition of chemicals, resulting in muscovado or granulated sugar. It does not include refined sugar, molasses or bagasse." The petitioners allege that this is a wrong definition of "raw cane sugar" as is known in the industry and throughout the sugar business. It is alleged that: ". . . all types of sugar such as raw, washed, blanco directo, plantation-white and refined sugar are basically the same except for the varying degrees of purity." "The process of producing any type of sugar (except muscovado) involves the use, but not addition of chemicals such as lime, soluble phosphate, carbon etc. These chemicals are simply cleaning agents used to remove impurities from the juice and are not added as part of the end product. The basic ingredient of sugar which is sucrose is not altered chemically in any manner. In all the stages of processing there is no chemical reaction involved." Furthermore, the following authorities state: "The elaborate processes of manufacture and refining described do not change the chemical character of the sugar itself. It can be deduced that sucrose which is inherently present in the sugarcane juice does not change chemically during processing and that it is the same chemical substance available in the final product." (Cane sugar Handbook, Spencer and Meade, Eight Edition, John Wiley and Sons, Inc., p. 7) The above indicates that while the common perception of sugar accepts a basic difference between raw sugar and refined sugar; the fact of the matter is refined sugar is just a purer form of raw sugar without any chemical change, without the addition of any chemical substance and without any change in physical characteristics except color. Considering all the foregoing, it is recommended by the undersigned that the definition of raw sugar be amended so that Section 9(2) of Revenue Regulations No. 5-87 will hereafter read as follows: Raw cane sugar refers to the crystalized or solidified juice of sugar cane through a milling process and a cleaning process without any addition of chemicals or the intervention of any procedure which in effect changes the physical characteristics of sugar as it is commonly known. It shall include raw sugar, washed sugar, blanco directo, plantation-white sugar and refined sugar. It does not include molasses or bagasse or any products wherein sugar in any form forms part of the components thereof. BIENVENIDO A. TAN, JR. Commissioner of Internal Revenue APPROVED: VICENTE R. JAYME Secretary of Finance