Pursuant to a government program of privatization, the National Development Company (NDC) decided to sell to private enterprise all of its shares in its wholly-owned subsidiary, the National Marine Corporation (NMC). It decided to sell in one lot its NMC shares and five (5) of its ships.
Whether or not the sale by the NDC of five (5) of its vessels to the private respondents is subject to VAT.
NO. VAT is levied only on the sale, barter or exchange of goods or services by persons who engage in such activities, in the course of trade or business. “Course of business” or “doing business” connotes regularity of activity. In the instant case, the sale was an isolated transaction. The sale was involuntary and made pursuant to the declared policy of Government for privatization and could no longer be repeated or carried on with regularity. It should be emphasized that the normal VAT-registered activity of NDC is leasing personal property.