EIGHTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
)
Senate
of tljf fefcrrtnrjf
S E N A T E
•19 JUL30 P4«7
S. No.
Introduced by Senator Ralph G. Recto
AN ACT
EXEMPTING THE SALE OR IMPORTATION OF PETROLEUM PRODUCTS AND 
SALE OF ELECTRICITY FROM THE VALUE ADDED TAX, AMENDING FOR 
THIS PURPOSE SECTIONS 108 AND 109 OF THE NATIONAL INTERNAL 
REVENUE CODE OF 1997, AS AMENDED
EXPLANATORY NOTE
This proposed measure seeks to restore the VAT exemption on the sale or 
importation of petroleum products and sale of electricity. In November 2005, 
Republic Act No. 9337, otherwise known as the Reformed Value-Added Tax (RVAT) 
Law, removed the VAT exemption of these products, among others.
In 2004, the national government (NG) posted a debt and fiscal deficit of P3.8 
Trillion and P 187 Billion, respectively1. As a percentage of GDP, the debt is at 
74.4% and fiscal deficit at 3.7%.2 These figures prompted the government to push 
for some fiscal measures such as the enactment of the RVAT Law to avert a fiscal 
crisis and lower the risk of default in debt payment.
The primary objective of the RVAT Law is to widen the tax base by removing 
a number of products and services from the list of exempt transactions under the 
National Internal Revenue Code of 1997, as amended, thereby increasing revenue 
collections. This is in line with the principle that in order for the VAT system to be 
effective, it should be broad-based and with limited exemptions.
1 Source of Basic Data: Bureau of the Treasury
2 Source of Basic Data: Bureau of the Treasury


The VAT reform provides a steady revenue stream for the government to 
finance various infrastructure projects and social programs. Likewise, it has played a 
major role in averting a looming financial crisis in 2004 and in weathering the 2008 
global financial crisis.
Undoubtedly, the VAT reform has produced significant and positive effects on 
our economy. In fact, 2018 figures would show that our economy has since 
recovered as the NG debt-to-GDP ratio greatly improved at 41.8% and NG deficit-to- 
GDP at 3.2%.3 However, as a consequence, such effect is also inflationary. VAT is an 
indirect tax that is passed on to the consumers of goods and services. Therefore, its 
imposition on the sale of certain products particularly petroleum products and 
electricity has the effect of increasing the prices of basic goods and services.
In December 2017, another revenue generating measure but with inflationary 
impact was enacted. Republic Act No. 10963, or the Tax Reform for Acceleration and 
Inclusion (TRAIN) Law. It was intended to finance, at least partially, the Build, Build, 
Build Program and other social services of the government. However, this law 
imposes additional excise tax on petroleum products, and just like the VAT, it has 
the effect of increasing the prices of goods and services.
The increased excise taxes and the imposition of VAT on petroleum products 
are too much of a burden on the consumers. To mitigate such burden, it is high time 
to restore the VAT exemption of petroleum products and electricity.
In view of the foregoing, the approval of this bill is earnestly sought.
/jiao/ejcv
3 Source of Basic Data: Bureau of the Treasury


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\
EIGHTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
)
.r’: 
Senate
■'■'\9Uitf o( tljr frfrrrtn rp
S E N A T E
S. No. 829
Introduced by Senator Ralph G. Recto
AN ACT
EXEMPTING THE SALE OR IMPORTATION OF PETROLEUM PRODUCTS AND 
SALE OF ELECTRICITY FROM THE VALUE-ADDED TAX, AMENDING FOR 
THIS PURPOSE SECTIONS 108 AND 109 OF THE NATIONAL INTERNAL 
REVENUE CODE OF 1997, AS AMENDED
Be it enacted by the Senate and House o f Representatives o f the Philippines in 
Congress assembled:
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Section 1. Section 108 of the National Internal Revenue Code of 1997, as
2 
amended, is hereby further amended to read as follows:
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"Sec, 108. Value-Added Tax on Sale o f Services and Use or Lease o f
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Properties. -
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"(A) Rate and Base o f Tax. -  There shall be levied, assessed and
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collected, a value-added tax equivalent to twelve percent (12% ) of gross
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receipts derived from the sale or exchange of services, including the use
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or lease of properties.
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'The phrase 'sale or exchange of services' means the performance
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of all kinds of services in the Philippines for others for a fee, remuneration
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or consideration, including those performed or rendered by construction
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and service contractors; stock, real estate, commercial, customs and
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immigration brokers; lessors of property, whether personal or real;
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warehousing services; lessors or distributors of cinematographic films;
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persons engaged in milling, processing, manufacturing or repacking goods
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for others; proprietors, operators or keepers of hotels, motels, resthouses.


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pension houses, inns, resorts; proprietors or operators of restaurants, 
refreshment parlors, cafes and other eating places, including clubs and 
caterers; 
dealers 
in 
securities; 
lending 
investors; 
transportation 
contractors on their transport of goods or cargoes, including persons who 
transport goods or cargoes for hire and other domestic common carriers 
by land relative to their transport of goods or cargoes; common carriers by 
air and sea relative to their transport of passengers, goods or cargoes 
from one place in the Philippines to another place in the Philippines; [sates
services of
franchise grantees of [ electric utilities,] telephone and telegraph, radio 
and television broadcasting and all other franchise grantees except those 
under Section 119 of this Code and non-life insurance companies (except 
their crop insurances), including surety, fidelity, indemnity and bonding 
companies; and similar services regardless of whether or not the 
performance thereof calls for the exercise or use of the physical or mental 
faculties. The phrase 'sale or exchange of services' shall likewise include:
"X X X ."
Sec. 2. Section 109 of the National Internal Revenue Code of 1997, as 
amended, is hereby further amended to read as follows:
"Sec. 109. Exempt Transactions. -
"(1) Subject to the provisions of Subsection (2) hereof, the following 
transactions shall be exempt from the value-added tax:
"(A) xxx;
"xxx;
"(AA) Sate of drugs and medicines prescribed for diabetes, high 
cholesterol, and hypertension beginning January 1, 2019; £andj
"(BB) SALE OR IMPORTATION OF PETROLEUM PRODUCTS ; 
(CC) SALE OR IMPORTATION OF RAW MATERIALS TO BE 
USED 
BY 
THE 
BUYER 
OR 
IMPORTER 
HIMSELF 
IN  
THE 
MANUFACTURE OF PETROLEUM PRODUCTS;


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"(DD) SALE OF ELECTRICITY BY GENERATION COMPANIES,
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TRANSMISSION BY ANY ENTITY, AND DISTRIBUTION COMPANIES,
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INCLUDING ELECTRIC COOPERATIVES; AND
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(EE) Sale or lease of goods or properties or the performance of
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services other than the transactions mentioned in the preceding paragraphs,
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the gross annual sales and/or receipts do not exceed the amount of Three
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million pesos (P3,000/000).
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"(2) X X X ."
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Sec. 3. Implementing Rules and Regulations (IRR). -  Within thirty (30) days
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from the effectivity of this Act, the Secretary of Finance, upon the recommendation
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of the Commissioner of Internal Revenue, shall promulgate the necessary rules and
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regulations for its effective implementation.
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Sec. 4. Repealing Clause. -  All laws, acts, decrees, executive orders,
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issuances, and rules and regulations or parts thereof which are contrary to and
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inconsistent with this Act are hereby repealed, amended or modified accordingly.
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Sec. 5. 
Effectivity. -  This Act shall take effect fifteen (15) days after its
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complete publication in the Official Gazette or in at least two (2) newspapers of
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general circulation.
Approved,