VAT RULING NO.

444-88

FACTS:

Philippine Shipyard and Engineering Corp. through its Internal auditor wrote to BIR,
informing the latter about its plan to establish a company consumer store where basic
commodities will be sold at cost. The projected sales per year was approximately P 2.5
million. Panlilio inquired to the BIR whether the sales can be zero-rated considering that
as a seller at cost, there would be no value-added to the goods.

ISSUE:

WON the sales in the consumer store should be zero-rated. (No)

RULING:

BIR ruled that the proposed sale transactions cannot qualify for zero rating since it does
not meet the conditions set under Section 100(a) of the Tax Code as amended by E.O.
273. Instead, Philippine Shipyard’s activity, in spite of the absence of profit and value-
added to the goods, can be classified as one to be undertaken by persons liable to VAT
under Section 99 of the Tax Code as amended states that: "Any person, who in the course
of trade or business sells, barters or exchanges goods, renders services or engaged in
similar transactions and any person who imports good shall be subject to value-added
tax"