May 18, 2015
http://goo.gl/6TGRlC
Senator Sergio Osmeña III and Rep. Jeffrey Ferrer (Neg. Occ., 4 th District) have filed bills stressing that raw cane sugar and raw sugar are one and the same and should be exempted from Value Added Tax, contrary to revenue regulations issued by the Bureau of Internal Revenue.
The House Committee on Ways and Means, headed by Rep. Romero Quimbo (Marikina City, 2 nd District), is holding a public hearing on House Bill 5713, filed by Ferrer, at the Belmonte Hall of the House of Representatives in Quezon City 1:30 p.m. tomorrow.
Sugar industry stakeholders, who have been complaining against the BIR's imposition of advance VAT on raw sugar, which they say should be exempt, have been invited to the hearing.
Ferrer and Osmeña said their bills, filed on May 5 in the House of Representatives and the Senate, are seeking an amendment of the National Internal Revenue Code (NIRC) of 1997, by providing the technical meaning of “raw cane sugar” to reflect the true intent of Congress in exempting the agricultural product from VAT.
Osmeña told the DAILY STAR last night that his Senate Bill 2749 clarifies that raw sugar and raw cane sugar are one and the same, and the original intent of the VAT law was for its exemption.
“We are pushing for the BIR's compliance with the original intent of the law,” the senator said.
Senate Bill 2749 states that “raw sugar or raw cane sugar means partially purified sucrose, which is crystallized from partially purified cane sugar, without further purification, but which does not preclude centrifugation or drying, and which is characterized by sucrose crystals covered with a film of cane molasses.”
Its content of sucrose by weight, in the dry state, also corresponds to a Polarimeter reading of less than 99.5, Osmeña's bill also states.
In a press statement posted on the House of Representatives website, Ferrer said that while Section 109 of the NIRC, as amended, is very clear about the VAT exemption transactions involving the sale of raw cane sugar in its original state, the BIR, through the issuance of Revenue Regulations 13-2013 and 4-2015 and the succeeding RRs redefined “raw cane sugar”, which effectively removed its VAT exemption.
“In what was a clear case of flip-flopping, the BIR initially said ‘raw cane sugar' can only be muscovado. Subsequent to that erroneous definition, the BIR revised its own definition and has now come up with an equally erroneous definition saying that ‘raw cane sugar' is now the one which should be referred to as ‘muscovado',” said Ferrer, chairman of the House Committee on Public Order and Safety.
In RR No. 13-2013, the BIR provided that “raw sugar refers to sugar produced by simple process of conversion of sugar cane without need of any mechanical or similar device, such as muscovado. For this purpose, raw sugar refers only to muscovado sugar. Centrifugal process of producing sugar is not, in itself, a simple process. Therefore, any type of sugar produced there from is not exempt from VAT”, he also said.
On the other hand, RR No. 4-2015 draws a distinction between “raw sugar,” which was the term the BIR originally used in RR No. 13-2013, and “raw cane sugar”, he added.
“It is quite apparent from these languages that the BIR focuses on the process involved in the production of ‘raw cane sugar or raw sugar.' The BIR's misinterpretation stems from its incorrect understanding of the processes involved in such production. The BIR believes that for ‘raw cane sugar' to be VAT exempt, it must follow that the production thereof is done through the simple process of conversion of sugar without need of any mechanical or similar device. The BIR further contends that centrifugation in itself is not a simple process,” Ferrer said.
Because of this, Ferrer said, the BIR is now saying that “raw sugar” should be subject to VAT , while “raw cane sugar” should not.
Ferrer said this distinction by the BIR is unwarranted because “raw sugar” and “raw cane sugar” are, in fact, one and the same. “The legislature did not intend to differentiate between ‘raw cane sugar' and ‘raw sugar' and neither should the BIR,” Ferrer said.
He said as provided for in Section 109 (A) of the NIRC, the sale of “raw cane sugar” along with molasses is included as one of the agricultural products whose transaction enjoys VAT exemption.
“It is very clear that ‘raw cane sugar' or ‘raw sugar' has a specific technical meaning with its corresponding standards. To change the same in order to justify additional collection of revenues would necessarily result in an illegal amendment of the law and would serve to violate our international agreements which use the accepted international definition,” Ferrer said.
The BIR's issuance of RRs has evidently resulted in an amendment of the law and is an invalid exercise of the executive's rule-making power, he added.
“In light of this seeming ambiguity and its effect on the sugar planters, its dependents and the consumers who will bear the brunt of the VAT imposition, Congress is duty-bound to clarify its intent and immediately act to protect the interest of the Filipino people,” Ferrer said.
In House Bill 5713, now pending at the Committee on Ways and Means, Ferrer is seeking the amendment of Section 109 (A) of the NIRC, as amended, by adding that, “For this purpose, raw cane sugar shall mean raw sugar whose content of sucrose by weight in the dry state, corresponds to a Polarimeter reading of less than 99.5°, such that but not limited to blanco directo, premium raw, special raw, washed sugar, sweeping and muscovado.” *CPG