THE Bureau of Internal Revenue (BIR) has won the P1.26-billion tax case filed by one of the world’s largest
food and beverage companies, Nestle Philippines, Inc.
This, after the Court of Tax Appeals (CTA) denied the petition filed by Nestle seeking the refund of the amount of P1.26 billion representing the Sweetened Beverage Tax (SBT) that it paid from May 1 to December 31, 2018.
In a 23-page ruling dated October 6, 2023, the CTA’s Special Third Division did not give merit to the claim of Nestle that its MILO products are milk products excluded from the coverage of SBT imposed under Section 150-B of the Tax Code.
“The Court disagrees. Petitioner’s MILO products fall within the enumeration of the Tax Code of sweetened beverages subject to SBT, and are also not among those excluded in the Code,” the CTA ruled.
In its petition for review, Nestle asked the CTA to declare that it is not liable to pay SBT on its removals of MILO products; declare that it is entitled to a refund of erroneously paid SBT amounting to P1,266,599,459.91; and order the BIR to refund the said amount.
Nestle is engaged in the manufacture of food and beverages, including MILO, a powdered chocolate malt flavored milk drink which is marketed by petitioner in various packs.
It argued that its products fall under Category “Flavored Fluid Milk Drinks” and classified as composite milk products which are excluded from the coverage of SBT.
However, the CTA held that MILO is a sweetened beverage and not a flavored milk exempted from the SBT.
It noted that Section 150-B of R.A. No. 10963 or the TRAIN Law (Tax Reform for Acceleration and Inclusion ) imposes a tax of P6 per liter of volume capacity on sweetened beverages using purely caloric sweeteners, and purely non-alcoholic sweeteners, or a mixture of caloric and non-caloric sweeteners.
Sweetened beverages are defined as non-alcoholic beverages that are prepackaged and sealed in accordance with Food and Drug Administration (FDA) standards, that contain caloric and/or non-caloric sweeteners added by the manufacturers.
These include other powdered drinks, not classified as milk, juice, tea, and coffee.
“An examination of the ingredients of the MILO products mentioned in the FDA Certificates presented by petitioner clearly shows that, while the said products have malt as one of its ingredients and is marketed by petitioner as a choco malt powdered milk drink, cocoa and/or cocoa powder and sugar are likewise present in the said MILO products,” the CTA said.
“Such being the case, the MILO products subject of the present petition cannot outrightly be categorized as fluid flavoured milk drinks as the same can also be categorized as cocoa-sugar mix… Being cocoa-sugar mixtures, the MILO products are not excluded from SBT,” the CTA said.