Commissioner of Internal Revenue v. Unisys Public Sector Services Corporation

 Commissioner of Internal Revenue v.  Unisys Public Sector Services Corporation 

G.R. No. 229078 (Resolution) 

June 15, 2022 

 

Under Sec. 4.112-2(a) of RR No. 16-2005, the government is mandated to withhold a final VAT at the rate of 5% on its gross payment, and that the remaining 7% standard input tax is allowable as input tax, in lieu of the actual input tax of the seller directly attributable to sales to the government. 

 

A taxpayer entered into a contract with the National Statistics Office (NSO) in relation to the latter's Civil Registry System Information Technology Project (CRS-ITP). In accordance with Section 114(C) of the Tax Code, 5% of the taxpayer's gross sales to 

NSO was withheld by the NSO as withholding agent. After filing several VAT returns, the taxpayer later discovered that it erroneously paid VAT to the BIR when it used its actual accumulated input VAT attributable to its sales to NSO, which is lower in amount, instead of the 7% standard input VAT leading to a higher net VAT payable. Thus, the taxpayer filed for a claim for refund for the alleged erroneously overpaid VAT. 

 

For its part, the BIR insists that the standard input tax of 7% is only a standard, which is simply the limit by which actual input tax is compared to determine if it exceeds, or if it is below the standard of 7% of gross sales to the government. 

 

The Supreme Court rule that the refund was proper. It reasoned that sales to the government or any of its political subdivisions, instrumentalities or agencies of goods and services are subject to 12% VAT. However, the language of Sec. 4.112-2(a) of RR No. 16-2005 clearly provides that the government is mandated to withhold a final VAT at the rate of 5% on its gross payment, and that the remaining 7% standard input tax is allowable as input tax, in lieu of the actual input tax of the seller directly attributable to sales to the government. The amount withheld by the government represents the net VAT payable by the seller, and the seller is not required to pay the difference between the 12% VAT and the 5% final VAT withheld by the government. Thus, the seller's actual input VAT which is attributable to its sales to the government remains unutilized.