MANILA, Philippines – The payment of the advance 12-percent value added tax (VAT) on refined and raw sugar may be imposed as early as May after the Bureau of Internal Revenue (BIR) issued a new regulation reiterating the imposition of such, effectively snubbing the petition of the Sugar Regulatory Administration (SRA) to postpone the implementation until the next crop year.
The BIR last week published a new revenue regulation reiterating that sellers of refined and raw sugar are required to pay in advance the 12-percent VAT before the sugar is withdrawn from the warehouses.
The BIR also maintained that only raw cane sugar or muscovado sugar is exempt from payment of VAT because it is produced without the use of any mechanical device.
“We have already received a copy of the new revenue regulation. This was published last week and is intended for implementation in May,” said SRA administrator Ma. Regina Martin.
“It’s a BIR regulation so we have no choice but to implement it. Right now we are talking to industry stakeholders on the effect of the revenue regulation,” she added.
Last month, the SRA asked the BIR to postpone the implementation of the advance 12-percent VAT on raw and refined sugar until the start of the next crop year.
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The next sugarcane cropping season would begin in September 2015 and end in August 2016.
Martin said the issuance of the new regulation in the middle of the milling season is causing confusion among producers and traders as the guidelines for implementation are not clear.
Traders in Negros Occidental are reluctant to bid on produced sugar because of uncertainties on the implementation of the regulation. She noted that if traders continue to refuse to bid on existing domestic sugar stocks, an artificial shortage may eventually occur and push sugar prices up.
The SRA is also challenging the definition of raw sugar in the new revenue regulation, noting that based on a 1989 BIR regulation, raw sugar is free from tax.
The BIR argued in the new regulation that any sugar produced using the centrifugal process is not exempt from VAT.
The SRA is also wary of the occurrence of double taxation as advance VAT would already be collected for raw sugar, which in turn, would be refined.
As such, the SRA believes that VAT on refined sugar should be adjusted or stopped.
A study conducted by the SRA on the implications of the imposition of a 12- percent advance VAT on raw sugar also shows that this would result to a price increase of around P5 per kilogram.
