EFFECTIVITY OF BIR RULING SUBJECTING HOUSEHOLD INSECTICIDES TO VAT

Under BIR Ruling No. 022-88 dated February 2, 1988, this Bureau had
ruled that the importation of insecticide called Trebon 10 EC is exempt
from value-added tax, because the same is one kind of pesticide that
acts as contact and stomach poison to various insect pests of rice . VAT
Ruling No. 16-88 dated February 5, 1988 placed household insecticide in
the category of articles exempt from VAT.  Both rulings provide the
basis for not imposing the VAT on insecticides whether household or
agricultural.

On July 13, 1989 , BIR Ruling No. 149-89 was issued stating:

“x x x this Office, after a study, has finally concluded that
articles, namely fertilizers, pesticides and herbicides, enumerated in Section103(c) of the Tax Code,
as amended by Executive Order No. 273, the sale or importation of which
is exempt from VAT, are those which are used for agricultural purposes.
 The mosquito coils referred to by you although used to kill insects
are not used for agricultural purposes; hence, they do not fall within
the purview of Sec. 103(c) of the Tax Code, as amended.”

Said ruling was followed by BIR Ruling No. 178-89 dated August 18,
1989 reiterating that mosquito coils, not being used for agricultural
purposes, are subject to VAT; thus, even raw materials used in the
manufacture of mosquito coils are subject to VAT.

Considering that no formal notice had been received by the industry
regarding the issuance of BIR Ruling No. 149-89 dated July 13, 1989 and
that BIR Ruling No. 178-89 was issued only to a particular mosquito coil
manufacturer, questions have been raised on their effectivity.

Pursuant to Section 246 of the Tax Code,
as amended, any revocation or reversal of any rulings shall not be
given retroactive application if the revocation will be prejudicial to
the taxpayer except where the taxpayer deliberately misstated the
material facts; where the facts subsequently gathered are materially
different from the facts on which the ruling is based; and where the
taxpayer acted in bad faith.

Since none of these [conditions] are present in the case of BIR
Ruling Nos. 149-89 and 178-89 and considering that both rulings were not
promptly communicated to the industry concerned, the effectivity of
both rulings shall be September 1, 1989.

This order shall take effect immediately and shall be given the widest publicity by all concerned.

Adopted: 3 Jan. 1990

(Sgd.) JOSE U. ONG
Commissioner of Internal Revenue