SENATE OF THE PHILIPPINES 
SIXTEENTH CONGRESS 
First Regular Session 
) 
) 
) 
SENATE 
Senate Bill No. 
2256 
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Introduced by SENATOR JOSEPH VICTOR G. EJERCITO 
AN ACT CLASSIFYING THE SERVICES OF FRANCHISE GRANTEES 
OF WATER UTILITIES, AND SALE OR IMPORTATION OF MACHINERY 
AND EQUIPMENT DIRECTLY USED IN OPERATING, MAINTAINING, 
IMPROVING AND EXPANDING DISTRIBUTION OF POTABLE WATER 
BY WATER UTILITIES AS VALUE-ADDED TAX EXEMPT 
TRANSACTIONS, AMENDING FOR THE PURPOSE SECTION 109 (1) 
OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED BY 
REPUBLIC ACT NO. 9337, AND FOR OTHER PURPOSES 
EXPLANATORY NOTE 
This measure aims to exempt water services from value-added-tax (VAT), 
amending for the purpose National Internal Revenue Code of 1997, as amended by 
Republic Act No. 9337. 
Since the commencement of the Concession Agreement between the 
Metropolitan Waterworks and Sewerage System (MWSS) and Manila Water and 
Maynilad in 1997, and up until 2011, water rates dramatically increased by 833.2% 
in the East concession areas and by 520% in West concession areas. At the onset of 
the agreement, Maynilad water rate was only P 7.21 per cubic meter, while Manila 
Water was only P 4.02 per cubic meter. According to the Local Water Utilities 
Administration, the average basic rate of water districts is Pl8/cubic meter from 
P6.75/cubic meter in 1996. 
As consumers are weighed down by the rising cost of water services, amid 
access to water being an international human right, the government doubly burdens 
the public by imposing value-added tax on water services and other basic utilities. 
From the introduction of the 10% VAT to its hike to 12% through the expanded VAT 
(E-VAT_Iaw, basic services and utilities have been unjustly taxed, raising the cost of 
water services. 


The exemption of water services from VAT will provide relief to the domestic 
economy and the people. It is one of the most viable options for Congress to 
immediately act on. Small revenue losses may easily be offset by the increased 
purchasing power of households and as cheaper production costs, as well as 
increased efforts in the collection of other taxes. 
This measure will give economic relief to the Filipino people, which will 
allow them to invest in food, education and health in order to ensure a healthy 
population and labor force as well as a progressive nation. 
The passage of this measure is earnestly sought. 
• 
• 
a "6-=-' 
JOSEPH VICTOR G. EJERCITO 


SENATE OF THE PHILIPPINES 
SIXTEENTH CONGRESS 
First Regular Session 
) 
) 
) 
SENATE 
Senate Bill No, _~2~2~5~6~ 
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'14 
MAY 28 All:52 
REl'EIVUi ;n .. r 
Introduced by SENATOR JOSEPH VICTOR G. EJERCITO 
AN ACT CLASSIFYING THE SERVICES OF FRANCHISE GRANTEES 
OF WATER UTILITJ[ES, AND SALE OR IMPORTATION OF MACHINERY 
AND EQUIPMENT DIRECTLY USED IN OPERATING, MAINTAINING, 
IMPROVING AND :EXPANDING DISTRIBUTION OF POTABLE WATER 
BY WATER UTILITIES AS VALUE-ADDED TAX EXEMPT 
TRANSACTIONS, AMENDING FOR THE PURPOSE SECTION 109 (1) 
OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED BY 
REPUBLIC ACT NO. 9337, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
SECTION I, Section 109 (1) of the National Internal Revenue Code, as 
amended by Republic Act No. 9337, is hereby further amended to read as follows: 
"SECTION 109, Exempt Transactions. - (1) Subject to the provisions of 
subsection (2) hereof, the following transactions shall be exempt from the value-
added tax: 
"(A)xxxx 
"(8) x x x x 
"(C)xxxx 
liXXXXXX 
"(U) xxxx 


"(V) SALES OF WATER UTILITIES; 
"(W) SERVICES OF FRANCHISE GRANTEES OF WATER UTILITIES; 
"(X) 
SALE 
OR IMPORTATION 
OF 
MACHINERIES AND 
EQUIPMENT, 
INCLUDING SPARE PARTS, TO BE DIRECTLY USED BY THE BUYER OR IMPORTER 
HIMSELF IN THE OPERATING, MAINTAINING, IMPROVING AND EXPANDING 
DISTRIBUTION OF POTABLE WATER BY WATER UTILITIES .. 
SECTION 2. Repealing Clause. - All laws, presidential decrees, executive 
orders, presidential proclamations, rules and regulations or parts thereof 
inconsistent with this Act are hereby repealed or modified accordingly. 
SECTION 3. Separability Clause. -
If any provision of this Act is 
subsequently declared unconstitutional, the validity of the remaining provisions 
hereof shall remain in full force and effect. 
SECTION 4. Effectivity Clause. - This Act shall take effect immediately after 
its complete publication either in the Official Gazette or in a newspaper of general 
circulation in the Philippines. 
Approved,