VAT Ruling No. 083-90

March 28, 1990 VAT RULING NO. 083-90 Philfoodex Bonded Warehouse, Inc. Room 712, L & S Building 1414 Roxas Blvd., Manila Attention: Mr . Felisberto C . Casten S i r s : This refers to your letter wherein you represented that your organization is composed of ethnic Philippine food producers which are using sugar as one of the main ingredients in the manufacture of finished products for export and that due to the shortfall of the production of sugar in the past, your members/exporters were allowed to import sugar on a tax and duty free scheme provided that an accounting for its usage was rendered. It is, further represented that in view of the expected surplus in local sugar production, your members decided to procure their sugar requirements this year in the domestic market in lieu of the above alternative. cdta Specifically, the mechanics of the purchases by your members are as follows: (1) Your members buy the raw "D" sugar allocated by the Sugar Regulatory Administration (SRA) from a sugar marketing firm through your association which serves as conduit of your members. (2) The raw "D" sugar are contracted for refining under a tolling agreement with Victorias Sugar Milling Co. Inc. (per Sugar Regulatory Administration Order No. 7, dated December 15, 1989). (3) The refined sugar is then withdrawn to your individual members for use in the manufacture of products for export. Based on the foregoing facts, you now request for a ruling if the withdrawal of refined sugar, which will be used as an ingredient in the finished food products for export, is covered by Revenue Regulation 7-89 which requires the advance payment of value added tax on the sale of refined sugar. In reply, please be informed that under the circumstances described above, your members may withdraw their own refined sugar without the advance payment of VAT as required in Section 3 of Revenue Regulation No. 7-89. This is justified by the fact that the refined sugar to be withdrawn are not for domestic sale, but rather for use as raw material in the manufacture of products for export which may either be exempt or subject to zero per cent VAT, thus, not resulting in any output tax against which any advance payment of VAT can be credited against. Furthermore, we affirm your statement that the tolling agreement between your members and Victorias Milling Co., Inc. is subject to VAT on the sale of services pursuant to Section 6(g) of Revenue Regulations No. 5-87. LibLex The following members of your organization: (1) R & M Preserves Allocation No. 90-002 441-1BV Rama Avenue Guadalupe, Cebu City (2) Orient Foods Ind. Corp. Allocation No. 90-003 Boloc-Boloc, Sibulan Negros Oriental (3) Sterling Green Allocation No. 90-004 International Exports 13 6th Street 1400 Caloocan City (4) JML Manufacturing Corp. Allocation No. 90-005 Caloocan Industrial Subd. Gen. San Luis, Kaybiga Caloocan City (5) Hi-Arrow Food Products Allocation No. 90-006 Suite 1514 State Centre Bldg. 333 Juan Luna St., Binondo Manila have been allocated raw "D" sugar by the SRA pursuant to their respective allocation numbers. In this connection, therefore said members are hereby authorized to withdraw refined sugar from Victorias Milling Co., Inc. under the circumstances described above without the advance payment of VAT required under Revenue Regulations No. 7-89. This authority is granted on the conditions that the said member exporters shall (a) furnish The Chief, VAT Division, the Quarterly Sugar Usage Report (SRA Form 003-A) as prescribed by SRA Circular Letter No. 16 dated January 2, 1990 and the pertinent supporting papers, including copies of the export documents and (b) file quarterly VAT returns pursuant to Section 110 of the Tax Code, as amended. llcd Very truly yours, JOSE U. ONG Commissioner of Internal Revenue