Whether it is eligible for tax exemption under the Value-Added Tax Act to purchase a tight, etc. from grain processing enterprises and sell it to feed processing enterprises and dairy farmers without any separate processing (negative)

Pursuant to Article 12(1)1 of the Value-Added Tax Act, the supply of goods or services is essential for supply of unprocessed foodstuffs under Article 12(1)1 of the Value-Added Tax Act. However, in order for the supply of goods or services to constitute an object of value-added tax exemption, the supply of goods or services must be the case where the principal supplier of the goods or services falls under the incidental goods or services, and even if the goods or services subject to tax exemption fall under those incidental to the goods or services subject to tax exemption and are also traded independently from the main goods or services without any connection therewith, the act of purchasing them as incidental goods or services subject to tax exemption under Article 12(3) of the Value-Added Tax Act does not constitute a case where the main goods or services are not subject to value-added tax exemption.

Article 12(1)1, (3), Article 3 subparag. 4 of the Enforcement Decree of the Value-Added Tax Act, and Article 28(1)1 of the Value-Added Tax Act

Supreme Court Decision 85Nu954 delivered on October 28, 1986 (Gong1986, 3136) Supreme Court Decision 94Nu1381 delivered on February 14, 1995 (Gong1995Sang, 1363)

Postal Exchange (Attorney Choi Jong-chul, Counsel for the plaintiff-appellant)

Head of Pyeongtaek Tax Office

1. The plaintiff's claim is dismissed.

2. Litigation costs shall be borne by the plaintiff.

The Defendant’s disposition of imposition of KRW 9,00,100 for the second term portion of 1995 against the Plaintiff on June 3, 1998, KRW 4,802,860 for the first term portion of 1996, KRW 4,742,550 for the second term portion of 1996, KRW 20,36,810 for the first term portion of 197, and KRW 53,43,200 for the second term portion of 197 is revoked, respectively.

1. Details of the disposition;

The following facts are recognized in full view of the whole purport of the pleadings in each of the statements in sub-paragraphs 1 to 7-8 of the evidence in which there is no dispute between the parties or between the parties.

A. During the value-added tax period from February 1995 to February 1997, the Plaintiff purchased crym, wheat, frym, frym, and frym fry, etc. (hereinafter “crym frym, etc.”) produced by grain processing enterprises, such as Non-Party 2 Food Co., Ltd. in a foreign country from grain processing enterprises, including Non-Party 2 Food Co., Ltd., and omitted sales from this part after selling gold 182,195,060 won and gold 182,195,000 won, etc. to Non-Party 2,000 won, without any separate processing.

B. Accordingly, on June 3, 1998, the Defendant considered that the Plaintiff purchased and sold smuggling, etc. as the supply of goods on which value-added tax is levied; on the portion directly sold to dairy farmers, 95, 9,000,100 won of value-added tax for the second period of June 3, 1995 (including 19,800 won of value-added tax for the second period of time), 4,802,860 won of value-added tax for the first period of January 1996 (including additional tax for the past period of 247,676 won), 4,742,50 won of value-added tax for the second period of February 1996 (including additional tax for the past period of 361,081 won of value-added tax), 20,36,810 won of value-added tax for the first period of time in 197 (including additional tax for the past period of 361,081 won of value-added tax);

2. The parties' assertion

The plaintiff asserts that it is illegal to impose value-added tax on the smuggling, etc. supplied by the plaintiff to feed processing companies, etc., and impose value-added tax on the packaging, etc. supplied by the plaintiff to dairy farmers, on the premise that it constitutes a taxable object even for the smuggling, etc. supplied by dairy farmers, since the plaintiff's packaging, etc. purchased from grain processing companies as raw materials of the grains exempt from value-added tax, to the extent that its original nature does not change.

On the other hand, the defendant asserts that the value-added tax should be levied on the supply of the main goods that are necessarily annexed to the supply of the main goods exempt from value-added tax because the annexed goods should be supplied together with the main goods. Thus, as in this case, the plaintiff's purchase and supply of only the tights, etc. that are inevitably annexed to the supply of grain exempt from value-added tax

3. Whether the disposition is lawful;

(a) Relevant statutes;

Article 1 (Taxable Objects) (1) Value-added Tax shall be imposed on the following transactions:

1. Supply of goods or services; and

(4) The supply of goods or services naturally annexed to the supply of goods which is the main transaction shall be included in such supply of goods, and the supply of goods or services inevitably annexed to the supply of services which is the main transaction shall be deemed to be included in such supply of services.

Article 12 (Exemption from Value-Added Tax) (1) The supply of any of the following goods or services shall be exempted:

1. Unprocessed foodstuffs (including agricultural products, stock farm products, fishery products, and forest products for food), and agricultural products, stock farm products, fishery products, and forest products which are produced in the Republic of Korea and are not for food and which are prescribed by the Presidential Decree;

(3) The supply of goods or services inevitably annexed to the supply of goods or services exempted under paragraph (1) shall be deemed to be included in such supply of goods or services exempted from taxes.

The goods or services deemed to be included in the supply of goods or services which are the main transaction pursuant to Article 1 (4) of the Enforcement Decree of the Act (Scope of Incidental goods or services) shall be those as referred to in the following subparagraphs:

4. Goods produced naturally incidental to the production of the main goods in connection with the main business;

Article 28 (Scope of Unprocessed Foods) (1) of the Enforcement Decree of the Act provides that foodstuffs not processed pursuant to Article 12 (1) 1 of the Act are as follows, which are not processed or used for food through the primary processing to the extent that the original nature of the original products does not change, such as sloping, millet, millet, beer, millet, dried, drying, drying, freezing, salting and packaging, and other original products:

1. Grains;

Article 99 (Application of Value-Added Tax Rate) of the Regulation of Tax Reduction and Exemption Act (Application of Value-Added Tax) shall apply to the value-added tax on the supply of goods or services in the following subparagraphs:

4. Machinery and materials falling under any of the following items, which are supplied to farmers and persons engaged in forestry business as prescribed by Presidential Decree for agriculture, livestock industry, or forestry:

(e) Feed under the Private School Management Act; and

(b) Markets:

(1) The judgment consortium, and the goods inevitably incidental to the supply of unprocessed foodstuffs as stipulated under Article 12(1)1 of the Act, which are subject to value-added tax exemption, are the goods inevitably incidental to the process of going through a primary process to the extent that the inherent nature of the grains, such as sloping, shot, and pots, etc., to be used for food such as smuggling supplied by the Plaintiff.

However, as to whether the supply of goods or services itself constitutes the supply of goods under Article 12(3) of the Act, the taxable object of value-added tax is not the supply of goods or services, but the supply of goods or services. Therefore, since the supply of specific goods or services is not itself but the supply of specific goods or services, it cannot be subject to tax exemption if it does not constitute the supply of goods or services subject to tax exemption under the Act. According to Articles 1(4) and 12(3) of the Act stipulating the taxable object of value-added tax and the supply of goods or services, any goods or services essential for the supply of the main goods or services are included in the main goods or services subject to tax exemption shall not be subject to separate taxation, and if the main goods or services are subject to tax exemption, they shall be limited to the supply of goods or services by the main goods or services, and even if they fall under the incidental goods subject to tax exemption, they shall not be subject to tax exemption under Article 12(3) of the Act if they are independent of the main goods or services without connection with the main goods.

Furthermore, according to Article 12 (1) 1 of the Act, an agricultural product for food, which is supplied for food, is domestically produced or imported, but it is not for food, and its supply should be domestically produced to be exempted. In this case, an agricultural product for food, which is not for food, is not for food, etc., which is incidental to the process of processing import smuggling for food, etc., which is supplied by the plaintiff. Ultimately, this is not for domestic production, and its supply cannot be deemed as an object of value-added tax exemption (see Supreme Court Decision 85Nu954, Oct. 28, 1986 cited by the plaintiff, which is related to rice products incidental to the processing of rice produced in the Republic of Korea, and the US is not for food produced in the Republic of Korea, and thus, the above Supreme Court decision cannot be applied as it is in this case).

Therefore, the imposition and notification of value-added tax should be lawful, considering that the smuggling supplied by the Plaintiff is an incidental goods, but it is not an object of value-added tax exemption.

(2) On the other hand, Article 99 of the Regulation of Tax Reduction and Exemption Act applies to the smuggling, etc. that the Plaintiff supplied directly to the farmer, but the zero zero zero zero zero zero zero zero zero zero zero tax rate applies to this case, except for the tax rate, and thus, the Plaintiff bears all the rights and obligations under the Value-Added Tax Act that are imposed by the general taxable business entity. Therefore, it is legitimate for the Defendant to impose the zero zero zero zero zero tax on

4. Conclusion

Therefore, the plaintiff's claim of this case seeking revocation on the premise that the disposition of this case is unlawful is dismissed as it is without merit. It is so decided as per Disposition.

Judges Yellow-Gyeong (Presiding Judge)