TRO issued vs 12% VAT on raw sugar

MANILA, Philippines – The Quezon City Regional Trial court issued a 20-day temporary restraining order (TRO) against the imposition of 12% value-added tax (VAT) on raw sugar, pending its decision on the petition of sugar millers seeking to nullify said VAT.

Presiding judge Lita Tolentino-Genilo of Branch 91 ordered respondents Bureau of Internal Revenue (BIR) and Department of Finance to cease and desist from implementing BIR Revenue Regulation No. 13-2013 for 20 days upon receipt of its decision dated November 4.

RR No. 13-2013 defines raw sugar as “produced by simple process of conversion of sugar cane without a need for any mechanical or similar device such as muscovado. For this purpose, raw sugar refers only to muscovado sugar.”

Raw cane sugar and molasses, previously classified as raw sugar and exempted from VAT, are now subjected to tax because these are derived from centrifugal processes, “not in itself a simple process,” said the new regulation.

The Philippine Sugar Milling Association (PSMA), in its petition for a TRO, questioned the validity of the new regulation.

PSMA cited Section 109(A) of the National Internal Revenue Code that classified raw cane sugar and molasses among agricultural or marine products in their “original state” that are exempted from VAT even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping.

PSMA also assailed BIR and DOF for issuing RR 13-2013 without any notice and hearing. BIR argued that it can do so, in the exercise of its quasi-legislative function.

In her decision, judge Tolentino-Genilo said that not affording notices and hearing to the concerned parties “is tantamount to denial of due process.”

“Considering the importance of the issue of the case and its effects on the sugar industry, and in the interest of of substantial justice and national economy, a TRO is hereby issued enjoining respondents from implementing RR 13-2013,” added Tolentino-Genilo.

The court heard PSMA’s petition for the nullification of said BIR resolution on November 8, 2013. – Rappler.com