Goods & Services Tax or Value Added Tax

What are Goods & Services

Goods and services are tangible and intangible goods that are produced and purchased in order to fulfill the needs and desires of consumers

What are Goods?

Goods are simply any physical or tangible products that can be seen and touched Some goods are quickly consumed ex. food, goods that are quickly consumed and must be acquired repeatedly Other forms of goods are long-term in nature, and may last for years or even decades ex. furniture, houses, durable goods

What are Services?

Services are intangible support that is provided to the consumer ex. a physician provides healthcare support or services, telephone companies provide communications services, banks provide a range financial services to customers

What is Goods & Services Tax (GST)?

Goods and Service Tax or Value Added Tax (VAT) in the Philippines is a form of sales tax. Collected on all sales of goods and services in the ordinary course of trade or business and on the importation of goods. It is an indirect tax, the cost of which can be passed on by the seller to the buyer.

R.A. No. 9337, also known as the Expanded Value-Added Tax Act of 2005
Passed in May 2005, and implemented on September 1, 2005 RA 9337 is a consolidation of 3 bills, namely House Bill No. 3555, House Bill No. 3705, and Senate Bill No. 1950. The Senate version was primarily authored by Sen. Ralph Recto.

R.A. No. 9337, also known as the Expanded Value-Added Tax Act of 2005
Said law was enacted to restructure the present VAT system and to provide additional revenue for the government through the increased tax rates, lifting of exemptions, and subjecting to tax transactions not previously covered by tax, in order to balance the governments budget and to curb the existing fiscal deficit

 The VAT is equivalent to 12% of the gross selling price or gross value in money of goods or properties sold, bartered or exchanged. Obligation to collect and remit rests with the seller, the cost of the tax may be passed on to the buyer, transferee or lessee of the goods, properties or services.

VAT Registered Entities

A VAT registered entity may credit the VAT paid on purchases of other goods and services against the tax on its current period sales of goods or services. VAT registered entities are required to issue an invoice or receipt for every sale and, in addition to regularly required accounting records, they must maintain subsidiary sales and purchase journals exclusively for VAT purposes. VAT reports must be submitted on a quarterly basis VAT payments must be made on a monthly basis.

Who are liable to register as VAT taxpayers?

Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or engages in the sale or exchange of services shall be liable to register if: a. His gross sales or receipts for the past (12) months, other than those that are exempt under Section 109 (A) to (U), have exceeded One Million Five Hundred Thousand Pesos (P1,500,000.00): or b. There are reasonable grounds to believe that his gross sales or receipts for the next (12) months, other than those that are exempt under Section 109 (A) to (U), will exceed One Million Five Hundred Thousand Pesos (P1,500,000.00).

What compliance activities should a VAT taxpayer, after registration as such, do promptly or periodically?
Pay the annual registration fee of P500.00 for every place of business or establishment that generates sales; Register the books of accounts of the business/occupation/calling, including practice of profession, before using the same; Register the sales invoices and official receipts as VAT-invoices or VAT official receipts for use on transactions subject to VAT.

What compliance activities should a VAT taxpayer, after registration as such, do promptly or periodically?
Filing of the Monthly Value-added Tax Declaration on or before the 20th day following the end of the taxable month Submit with the RDO/LTDO having jurisdiction over the taxpayer, on or before the deadline set in the filing of the Quarterly VAT Return, the soft copy of the Quarterly Schedule of Monthly Sales and Output Tax

According to the E-Vat primer, through RA 9337 the E-Vat cover the following goods & services previously not subject to VAT:
Petroleum products and other indigenous fuels Power and electric cooperatives Services rendered by doctors, lawyers and other professionals who earn more than P1.5 million annually Domestic carriage of passengers by air and sea Non-food agricultural products Works of art, including literary works and musical compositions

Because the E-Vat's coverage was expanded, several measures were instituted to reduce its impact:
Reduction of excise tax on gasoline, diesel, kerosene and bunker fuel Removal of franchise tax on domestic airlines and common carriers tax on domestic shipping Increase in presumptive input VAT of agro processors from 1.5% to 4% VAT marginal threshold increase from P550,000 to P1.5 million per year Rental threshold increase from P8,000/mo. to P10,000/mo. Real property threshold increase from P1 million to P2.5 million

Tax Exempt Commodities

Agricultural and marine products in their original state (ex. vegetables, meat, fish, fruits, eggs, rice, etc.) Sale of low-cost houses and lots not exceeding P2.5 million Lease of residential spaces not exceeding P10,000 monthly Sales of persons and establishments earning not more than P1.5 million annually, which may include sari-sari stores, carinderias, street vendors Educational services rendered by both public and private educational institutions Books, newspapers, and magazines Services rendered by doctors and lawyers who do not earn more than P1.5 million annually Importation of personal and household effects belonging to those who are going to resettle in the country

E-Vat has come under fire from many sectors and from the political spectrum:
It still became an additional burden for the poor Lawmakers have already filed bills to repeal or amend RA 9337: Senators Manuel Roxas III and Francis Escudero filed separate bills seeking the removal of the 12% E-Vat on oil, Ana Consuelo "Jamby" Madrigal filed Senate Bill 24 which sought to repeal the entire law Gabriela Party-list Representatives Liza Maza and Luz Ilagan seek complete repeal of the said law

Cost-Benefit Analysis of E-Vat

Costs:
a.) VATable items Some of the items which were not taxed before are now subject to VAT ex. power and electric cooperatives, Medical and Legal services b.) Macroeconomic Perspective E-VAT will also have an effect in both the GDP growth rate and in the inflation rate. c.) Tax rate increase Corporate tax rate increased to 35%, this would have an effect in corporations and businesses and might translate to higher prices for the consumers

Cost-Benefit Analysis of E-Vat

Costs: d.) Effect in the Business Sector Due to the higher tax rates and higher costs of input, E-VAT made the cost of doing business rise. It may encourage previous honest local businessmen to evade taxes. Investments might slow down because other countries might become more attractive.

Cost-Benefit Analysis of E-Vat

Benefits: a.) Incremental revenues for infrastructure Benefits of this legislation will bring lasting rewards to the Filipinos. Additional tax collection will add up to the countrys budget for reforms and infrastructure development, public education, health premiums, environmental conservation and agricultural modernization.

Cost-Benefit Analysis of E-Vat

Benefits: b.) Equitable tax collection Implementation of RA 9337 also promotes an equitable system of tax collection. The E-vat law recognizes the economic poverty of the poor by making most commodities that the poor consume exempted ex. agricultural and marine products, educational services. Most of the goods in the poors consumption basket are VAT-free

Cost-Benefit Analysis of E-Vat

Benefits:
c.) Improved tax collection system In order to effectively implement RA 9337, the Bureau of Internal Revenue has developed a new, more organized system of tax collection and account registration, that will help facilitate a more transparent tax system d.) Increase in GDP and government services With the implementation of the E-VAT law additional revenues for the government have been coming in. That results in bigger budget allocations for social services such as education and health

Thank you