Practice question
A special statute expressly exempts Institution X only from direct VAT liability on its own sales. It contains no exemption for its purchases or for indirect taxes passed on by suppliers. X buys ordinary taxable supplies from a VAT-registered dealer and claims that its sales exemption necessarily bars the dealer from passing VAT to it. No other exemption or zero-rating rule applies. Which analysis is correct?
- X’s sales exemption necessarily exempts all purchases
- The limited direct-tax exemption does not by itself relieve X of VAT passed on as purchaser
- The dealer’s VAT liability becomes X’s income tax
- Every sale to an institution is exempt regardless of statute
- The dealer may treat every transaction as zero-rated without a legal basis
Legal references
- https://lawphil.net/statutes/repacts/ra1997/ra_8424_1997.html — NIRC, section 105, indirect nature of VAT
- https://lawphil.net/judjuris/juri2005/feb2005/gr_153866_2005.html — CIR v. Seagate Technology (Philippines), G.R. No. 153866, February 11, 2005, indirect taxation and distinction between liability and burden
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