Republic of the Philippines

Department of Finance



April 1, 2003



Mr. Luis F. Banzon


Liquefied Petroleum Gas Institute

of the Philippines


Mr. Adelio R. Capco


Petron Gasul Dealers Association,


Suite 44 Legaspi Suites

178 Salcedo St., Legaspi Village

Makati City




This refers to your letter dated January 18, 2003 requesting reconsideration on the action taken by this Bureau that Liquefied Petroleum Products (LPG) are subject to local taxation.


Under a letter dated July 13, 201 addressed to De Guzman and Celes Law Office, it was opined that LPG is taxable in view of the specific provisions of Section 143 (c) of the Local Government Code (LGC) of 1991 imposing a tax on cooking gas.


That Office contends that while the Implementing Rules and Regulations (IRR) of the LGC imposed local business tax on cooking gas, it does not follow with absolute certainty that LPG is also subject to said tax for reason that under Section 133 (h) of the Code, quoted hereunder, the taxing powers of local government units does not extend to petroleum products.


“SEC. 133.  Common Limitations on the Taxing Powers of Local Government Units.  – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:


“(a) x x x.


“(h) Excise tax on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products;


“x x x.


In addition, that Office submitted that petroleum products which was mentioned “last” under Article 232 (h) of the IRR should be taken as an exception to “cooking gas” which was mentioned “first” in Article 232 (c) of the said Rules.  In other words, the latter provisions modify or restrict the earlier provisions.


The Department of Justice in a Resolution dated September 17, 1993 on a question about a City of Manila Ordinance, has ruled that local government units imposing taxes on petroleum products are violating the law, as doing so is contrary to law, public policy and national economic policy.


In relation thereto, it was stated that the Energy Regulatory Board, has announced that additional taxes on petroleum business (which will eventually be passed on to consumers) are detrimental to the economy and disruptive of business and industrial plans and policies, and should at all times be avoided at this time when the government is in the process of implementing its economic recovery programs.


It was further mentioned that the impost of Sections 130 (b) (4) and 133 (h) of the LGC, and Article 232 (h) of its IRR are clear and that it is beyond the power of the local government units to impose any kind of tax on petroleum products or any business engaged in the production, manufacture, refining, distribution or sale thereof.


Finally, it was emphasized that the exception is without any qualification and is clearly articulated in the law, indicating thereby a clear legislative intent.  Thus, local government units are prohibited from levying taxes on petroleum products.


In view of all the foregoing and considering the fact that imposing taxes on LPG would then mean additional burden, which shall ultimately be shouldered by the consuming public, this Bureau so holds that LPG is not subject to local business tax.  However, said LPG business shall be liable to pay the Mayor’s permit and other regulatory fees or service charges that the local government unit may impose under a duly-enacted tax ordinance.


On other hand, non-petroleum products, e.g., Compressed Natural Gas (CNG) or Liquefied Natural Gas (LNG) which can be used for cooking, are subject to local business tax under Section 143 (c) of the LGC.


This accordingly modifies any other rulings or opinions which this Bureau may have issued previously relative to the taxability of LPG.


Very truly yours,





Executive Director


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