MANILA, Philippines - A Quezon City court has temporarily stopped the imposition of the 12 percent value added tax (VAT) on raw sugar as it hears the petition of sugar millers for the nullification of an internal revenue regulation ordering such.
In a decision handed down on Nov.4, Quezon City Regional Trail Court Branch 91 judge Lita Tolentino-Genilo issued a 20-day temporary restraining order (TRO) on the implementation of Revenue Regulation 13-2013 that reclassified raw sugar as a finished product and therefore subjected to VAT.
In its petition for a TRO, the Philippine Sugar Milling Association (PSMA) questioned the validity of the new revenue regulation cited Section 109 of the National Internal Revenue Code which states that the sale or importation of agricultural and marine food products in their “original state†shall be exempt from VAT.
Products considered in their original state under the law include polished and/or husked rice, corn grits, raw cane sugar, molasses, ordinary salt and copra.
These products are still considered to be in their original state even if these have undergone simple preservation processes such as freezing, drying, salting, broiling, roasting, smoking or stripping.
The new revenue regulation defines raw sugar as sugar produced by simple process of conversion of sugar cane without a mechanical device.
The Bureau of Internal Revenue stated in the new regulation that the centrifugal process of producing sugar is not considered as a simple process. Any type of sugar produced from this process therefore is not exempted from VAT.
“For this purpose, raw sugar refers only to muscovado sugar,†and not brown sugar, according to the new regulation.
Muscovado sugar is unrefined sugar produced from sugarcane juice by evaporation and draining off molasses. Brown sugar is partially processed through centrifugal process, being the first crystalization of sugarcane juice.
The court said that during the summary hearings held on the case, the BIR argued that it issued the new regulation “without any notice and hearing†because of its quasi-legislative function.
“The BIR admitted that the assailed RR 13-2013 in the exercise of its quasi-legislative function, without affording notices and hearing to the concerned parties which is tantamount to due process,†Tolentino-Genilo said in the decision.
Tolentino-Genilo said the implementation of the new revenue regulation must be stopped because of national interest.