Republic Act No. 9337 is constitutional; its enactment did not violate the procedural requirements of the Constitution regarding the origination of revenue bills or the amendment process, and its substantive provisions, including the President's standby authority to increase the VAT rate and the limitations on input tax credits, do not constitute undue delegation of legislative power, nor do they violate the due process, equal protection, uniformity, or progressivity clauses of the Constitution.

The enactment of Republic Act No. 9337 stemmed from the government's need to address a mounting budget deficit and generate significant revenue to stabilize the country's fiscal situation. The law aimed to restructure the Value-Added Tax (VAT) system by expanding its base, increasing the rate (with a standby authority for the President to raise it further), and introducing measures intended to improve tax administration and collection efficiency as part of a broader fiscal reform agenda.

• Republic Act No. 9337 was enacted as a consolidation of House Bill Nos. 3555 and 3705, and Senate Bill No. 1950, aimed at restructuring the VAT system and increasing government revenues.
• The House Bills primarily focused on amending VAT provisions (Sections 106, 107, 108, 109, 110, 111, 114 of NIRC), proposing a 12% VAT rate or varied rates.
• Senate Bill No. 1950 proposed amendments not only to VAT provisions but also to other NIRC sections concerning corporate income tax, percentage tax, franchise tax, and excise taxes, while proposing a 10% VAT rate.
• The President certified the House and Senate bills as urgent.
• A Bicameral Conference Committee (BCC) was convened to reconcile the disagreeing provisions between the House and Senate versions.
• The BCC introduced several changes, including: (1) retaining the 10% VAT rate but providing a "standby authority" for the President to increase it to 12% effective January 1, 2006, upon the satisfaction of specific economic conditions (VAT collection/GDP ratio or National deficit/GDP ratio); (2) deleting the "no pass-on" provisions found in both House and Senate bills; (3) imposing a 70% limit on creditable input VAT against output VAT; (4) imposing a 60-month amortization period for input VAT on capital goods exceeding P1 million; (5) imposing a 5% final withholding VAT on government payments; and (6) adopting amendments to corporate income tax, percentage, and excise taxes largely based on the Senate Bill.
• The consolidated bill was ratified by both Houses of Congress and signed into law by the President on May 24, 2005, as R.A. No. 9337, effective July 1, 2005.
• Various groups filed petitions challenging the constitutionality of R.A. No. 9337 before its effectivity date.
• The Supreme Court issued a TRO on July 1, 2005, halting the law's implementation due to confusion surrounding its effects, particularly the perceived automatic 10% price increase across various sectors.

• R.A. No. 9337 violates Article VI, Section 24 of the Constitution because revenue-generating provisions related to income tax, percentage tax, and excise tax did not originate exclusively from the House of Representatives, as they were introduced only in the Senate Bill or by the Bicameral Conference Committee.
• The Bicameral Conference Committee exceeded its authority by inserting provisions not found in either the House or Senate bills (e.g., standby authority, 70% input tax cap, amendments to non-VAT NIRC sections) and deleting provisions common to both (e.g., no pass-on clause), effectively acting as a third legislative chamber.
• The enactment violated Article VI, Section 26(2) ("no-amendment rule") as substantial changes were made by the Bicameral Conference Committee after the bills had passed third reading in both houses.
• Sections 4, 5, and 6 of R.A. No. 9337, granting the President standby authority to increase the VAT rate to 12%, constitute an undue delegation of the legislative power to tax, violating Article VI, Section 28(2), as it falls outside the scope of permissible delegation (tariff powers) and lacks sufficient standards, making it contrary to republicanism and potentially manipulable by the President.
• The 12% VAT rate increase mechanism violates the due process clause (Article III, Section 1) as it imposes an unfair, unreasonable, and ambiguous tax burden, leaving the public unsure about the applicable rate year-to-year and lacking a provision for reverting to 10% if conditions change.
• Section 8 (amending NIRC Sec. 110(A)(2) & 110(B)) imposing a 60-month amortization for input tax on capital goods over P1M and a 70% cap on creditable input tax, and Section 12 (amending NIRC Sec. 114(C)) imposing a 5% final withholding VAT on government transactions, are arbitrary, oppressive, excessive, and confiscatory, violating the due process clause (Art. III, Sec. 1).
• These limitations on input tax (a property right) effectively tax businesses even without profit or value-added and violate the equal protection clause (Art. III, Sec. 1) by discriminating against businesses with high input tax ratios, capital investments, or government transactions, without valid classification.
• The 70% input tax cap and the 5% final withholding tax violate the uniformity and equity principle (Art. VI, Sec. 28(1)) and the progressivity principle, disproportionately harming smaller businesses with lower margins.
• Allowing VAT-registered entities to retain a portion of collected taxes (due to the 70% cap) violates the principle that tax revenue is solely for public purposes.

• R.A. No. 9337 enjoys the presumption of constitutionality, and petitioners failed to overcome this presumption.
• Procedural issues regarding the Bicameral Conference Committee's powers, the origination clause, and Senate amendments were already settled in Tolentino vs. Secretary of Finance, which upheld the enrolled bill doctrine and the Senate's broad power to amend House revenue bills, including amendments by substitution.
• The amendments introduced by the Senate and the BCC, including those on non-VAT taxes, were germane to the general subject matter (revenue generation and tax system reform) initiated by the House bills.
• There is no undue delegation of legislative power; the law is complete, providing a clear policy and fixing standards (economic conditions) for the President's mandatory duty to increase the VAT rate. The President merely ascertains the facts to execute the law.
• The Secretary of Finance acts as an agent of Congress, not the President, in determining the factual conditions, and the President's duty to implement the rate increase is ministerial (indicated by "shall").
• The limitations on input tax (70% cap, 60-month amortization) and the 5% final withholding tax are not arbitrary, oppressive, or confiscatory; input tax credit is a statutory privilege, not a vested right, which Congress can limit or modify. Unutilized input tax can be carried over or potentially refunded under specific conditions.
• The challenged provisions do not violate due process or equal protection; the classifications are valid, and the limitations apply uniformly within the class. The 5% final withholding tax is a simplified collection method.
• The law complies with the uniformity and equity principle (Art. VI, Sec. 28(1)); the VAT rate is uniform, and mitigating measures (thresholds, exemptions, reduced excise taxes, increased corporate income tax) ensure equity and soften the impact. The Constitution mandates evolving towards, not immediately prescribing, a progressive tax system.
• R.A. No. 9337 is a crucial component of the government's fiscal reform agenda necessary for economic stability and growth.

• Procedural Issues:
  • Whether R.A. No. 9337 violates Article VI, Section 24 of the Constitution (requiring revenue bills to originate exclusively in the House of Representatives).
  • Whether R.A. No. 9337 violates Article VI, Section 26(2) of the Constitution (the "no-amendment rule" upon third reading).
  • Whether the Bicameral Conference Committee exceeded its authority in introducing amendments and deletions.
• Substantive Issues:
  • Whether Sections 4, 5, and 6 of R.A. No. 9337 (standby authority for the President to increase VAT rate) constitute undue delegation of legislative power in violation of Article VI, Section 28(2) of the Constitution.
  • Whether Sections 4, 5, and 6 of R.A. No. 9337 violate the due process clause (Art. III, Sec. 1) and the principle of taxation based on fiscal adequacy.
  • Whether Section 8 (amending NIRC Sec. 110(A)(2) & 110(B) - 60-month amortization and 70% input tax cap) and Section 12 (amending NIRC Sec. 114(C) - 5% final withholding VAT) violate the due process and equal protection clauses (Art. III, Sec. 1).
  • Whether the challenged provisions violate the uniformity and equity principle of taxation (Art. VI, Sec. 28(1)).
  • Whether the challenged provisions violate the constitutional mandate for a progressive system of taxation (Art. VI, Sec. 28(1)).

• The petitions are DISMISSED. R.A. No. 9337 is declared constitutional, and the TRO issued on July 1, 2005, is LIFTED upon finality of the decision.
• Procedural Issues: The Court upheld the validity of the enactment process based on the enrolled bill doctrine, reiterating its ruling in Fariñas and Tolentino. The signing by the Senate President and House Speaker, and certification by the Secretaries, are conclusive proof of due enactment. Courts generally do not inquire into compliance with internal legislative rules. The power of the Bicameral Conference Committee to reconcile differences is broad, allowing for amendments and even new provisions germane to the subject matter. The "no-amendment rule" applies only to the procedure within each House before a bill is transmitted, not to the BCC report. Article VI, Section 24 was not violated because the revenue bill originated from the House; the Senate has the power to propose extensive amendments, even on provisions not touched by the House bill, as long as they are germane to the purpose of raising revenue and reforming the tax system, as affirmed in Tolentino. The amendments on income, percentage, and excise taxes were deemed germane as they aimed to distribute the tax burden and mitigate the VAT's impact.
• Substantive Issues: There is no undue delegation of legislative power in the President's standby authority. The law is complete, setting the policy (increase VAT rate under certain conditions), and provides sufficient standards (specific economic ratios - VAT/GDP > 2.8% or Deficit/GDP > 1.5%) for the President to ascertain the facts. The use of "shall" makes the President's duty to increase the rate ministerial upon the occurrence of the conditions, leaving no discretion. The Secretary of Finance acts merely as an agent of the legislative department to determine the factual basis. The conditions are clear and not ambiguous; the law does not provide for reverting the rate to 10%. The limitations on input VAT (70% cap, 60-month amortization) and the 5% final withholding VAT do not violate due process or equal protection. Input tax credit is a statutory privilege, not a vested property right, and Congress can limit or modify it. The limitations are not arbitrary or confiscatory; unutilized input tax can be carried over. The 5% final withholding tax is a valid classification for transactions with the government and a simplified collection method. The law satisfies the uniformity requirement as the rates (0%, 10%, or 12%) apply uniformly within classes. It is also equitable, containing threshold margins, exemptions for basic necessities, and mitigating measures. The Constitution mandates Congress to evolve a progressive system, not prohibit indirect taxes like VAT, which are inherently regressive but whose effects can be minimized through exemptions and zero-rating.

• Enrolled Bill Doctrine — Definition: The signing of a bill by the Speaker of the House and the Senate President and the certification by the Secretaries of both Houses of Congress that it was passed are conclusive proof of its due enactment. Application: The Court refused to look behind the enrolled copy of R.A. No. 9337 to investigate alleged irregularities in the Bicameral Conference Committee proceedings or compliance with internal congressional rules, citing Fariñas and Tolentino.
• Separation of Powers — Definition: The constitutional principle distributing governmental powers among the legislative, executive, and judicial branches, each supreme within its own sphere. Application: The Court emphasized deference to the legislative branch regarding the wisdom and expediency of the tax law and its internal procedures, intervening only upon clear violations of constitutional provisions.
• Non-Delegation of Legislative Power (Potestas Delegata Non Delegari Potest) — Definition: The principle that powers delegated (by the Constitution to Congress) cannot be further delegated, especially purely legislative powers like taxation, except under specific constitutional exceptions or when the delegation involves only the ascertainment of facts based on sufficient standards set by law. Application: The Court ruled that the President's standby authority to increase the VAT rate was not an undue delegation of legislative power because the law itself set the policy and provided complete and sufficient standards, leaving only the ascertainment of facts (economic conditions) to the executive, a permissible delegation.
• Sufficient Standard Test — Definition: A test for valid delegation of power, requiring that the law sets adequate guidelines or limitations for the delegate to map out the boundaries of their authority and determine when the legislative command is to be effected. Application: The specific economic conditions (VAT collection/GDP ratio > 2.8% or National deficit/GDP > 1.5%) were deemed sufficient standards to guide the President in implementing the VAT rate increase.
• Presumption of Constitutionality — Definition: Every statute is presumed valid and constitutional unless proven otherwise by clear and convincing evidence; courts resolve doubts in favor of validity. Application: The Court stated that petitioners failed to overcome this presumption regarding R.A. No. 9337.
• Due Process Clause — Definition: A constitutional guarantee against arbitrary governmental action; requires laws to be fair, reasonable, and non-oppressive (substantive due process) and implemented through fair procedures (procedural due process). Application: The Court found the limitations on input tax credits and the 5% final withholding tax not violative of substantive due process, deeming them reasonable exercises of legislative power and not arbitrary or confiscatory, especially since input tax credit is a privilege.
• Equal Protection Clause — Definition: A constitutional guarantee that all persons similarly situated shall be treated alike, both in privileges conferred and liabilities imposed; allows for valid classification based on substantial distinctions germane to the law's purpose. Application: The Court held that the challenged provisions (70% cap, 5% withholding tax) did not violate equal protection as they applied uniformly to all VAT taxpayers or all entities transacting with the government, respectively, and the classifications were reasonable.
• Uniformity of Taxation — Definition: A constitutional principle (Art. VI, Sec. 28(1)) requiring that all taxable articles or properties of the same class be taxed at the same rate. Application: The Court found R.A. No. 9337 uniform because the VAT rates (0%, 10%/12%) apply equally to all subjects within the same class.
• Equitability of Taxation — Definition: A constitutional principle (Art. VI, Sec. 28(1)) related to fairness in the apportionment of the tax burden. Application: The Court found R.A. No. 9337 equitable due to its threshold limits, exemptions for basic goods, and various mitigating measures designed to cushion its impact.
• Progressivity of Taxation — Definition: A constitutional principle (Art. VI, Sec. 28(1)) where tax rates increase as the tax base (income, wealth) increases; based on the ability-to-pay principle. Application: The Court reiterated that the Constitution mandates Congress to evolve a progressive system, not prohibit indirect taxes like VAT which are inherently regressive. The regressive effects of VAT are minimized through exemptions and zero-rating.

• "The expenses of government, having for their object the interest of all, should be borne by everyone, and the more man enjoys the advantages of society, the more he ought to hold himself honored in contributing to those expenses." (Quoting Anne Robert Jacques Turgot)
• "Every law enjoys in its favor the presumption of constitutionality."
• "Under the ‘enrolled bill doctrine,’ the signing of a bill by the Speaker of the House and the Senate President and the certification of the Secretaries of both Houses of Congress that it was passed are conclusive of its due enactment."
• "[I]f a change is desired in the practice [of the Bicameral Conference Committee] it must be sought in Congress since this question is not covered by any constitutional provision but is only an internal rule of each house." (Quoting Tolentino)
• "The charge that in this case the Conference Committee acted as a third legislative chamber is thus without any basis." (Quoting Tolentino)
• "Art. VI. § 26 (2) must, therefore, be construed as referring only to bills introduced for the first time in either house of Congress, not to the conference committee report." (Quoting Tolentino)
• "To insist that a revenue statute – and not only the bill which initiated the legislative process culminating in the enactment of the law – must substantially be the same as the House bill would be to deny the Senate’s power not only to “concur with amendments” but also to “propose amendments.”" (Quoting Tolentino)
• "The principle of separation of powers ordains that each of the three great branches of government has exclusive cognizance of and is supreme in matters falling within its own constitutionally allocated sphere."
• "Potestas delegata non delegari potest which means ‘what has been delegated, cannot be delegated.’"
• "'The true distinction’... ‘is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring an authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made.’" (Quoting Judge Ranney via Vera)
• "There is no undue delegation of legislative power but only of the discretion as to the execution of a law. This is constitutionally permissible."
• "The input tax is not a property or a property right within the constitutional purview of the due process clause. A VAT-registered person’s entitlement to the creditable input tax is a mere statutory privilege."
• "The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall ‘evolve a progressive system of taxation.’" (Quoting Tolentino)
• "Let us not be overly influenced by the plea that for every wrong there is a remedy, and that the judiciary should stand ready to afford relief... Let us likewise disabuse our minds from the notion that the judiciary is the repository of remedies for all political or social ills..." (Quoting Vera vs. Avelino)

• Tolentino vs. Secretary of Finance (235 SCRA 630 & 249 SCRA 628) — Heavily relied upon as controlling precedent regarding the powers of the Bicameral Conference Committee, the Senate's power to amend revenue bills originating from the House, the interpretation of the "no-amendment rule," and the nature of VAT concerning progressivity.
• Fariñas vs. The Executive Secretary (417 SCRA 503) — Cited to reaffirm the application of the enrolled bill doctrine, barring judicial inquiry into alleged procedural irregularities within Congress that do not violate specific constitutional provisions.
• People vs. Vera (65 Phil. 56) — Cited for its extensive discussion on the principle of non-delegation of legislative power, the distinction between delegating the power to make law and the power to ascertain facts for its execution, and the limits of judicial review concerning political questions.
• Edu vs. Ericta (35 SCRA 481) — Cited to reiterate the test for undue delegation: the statute must be complete in itself and provide sufficient standards.
• Pelaez vs. Auditor General (122 Phil. 965) — Cited regarding the requirement of sufficient standards for valid delegation of power.
• Angara vs. Electoral Commission (63 Phil. 139) — Cited regarding the principle of separation of powers.
• Philippine Judges Association vs. Prado (227 SCRA 703) — Cited along with Tolentino regarding the recognized practice of giving conference committees latitude in reconciling bills.
• Arroyo vs. De Venecia (277 SCRA 268) — Cited within the Fariñas quote to emphasize that courts generally do not intervene based on alleged non-compliance with internal legislative rules, unless constitutional provisions or private rights are violated.
• Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan (163 SCRA 371) — Cited to support the equity of VAT due to threshold exemptions for small businesses and basic necessities.
• Sison vs. Ancheta (130 SCRA 654) — Cited regarding the need for proof when invoking due process and equal protection clauses against tax laws, and outlining grounds (arbitrariness, confiscation, lack of public purpose) for invalidating a tax statute under due process.
• Commissioner of Internal Revenue vs. Benguet Corp. (G.R. Nos. 134587 & 134588, July 8, 2005) — Cited regarding the direct liability of the seller for VAT payment.
• United Paracale Mining Co. vs. Dela Rosa (221 SCRA 108) — Cited to distinguish statutory privileges from vested rights, stating persons have no vested rights in statutory privileges.
• Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch) (G.R. No. 152609, June 29, 2005) — Cited regarding the definition of direct and indirect taxes.

• 1987 Constitution, Article VI, Section 24 (Origination Clause) — Requires all revenue bills to originate exclusively in the House, but allows the Senate to propose or concur with amendments. Central to the procedural challenge regarding Senate amendments and BCC actions.
• 1987 Constitution, Article VI, Section 26(2) (Three-Reading and No-Amendment Rules) — Requires bills to pass three readings on separate days and prohibits amendments upon last reading. Central to the procedural challenge regarding BCC actions.
• 1987 Constitution, Article VI, Section 28(1) (Uniformity, Equity, and Progressivity) — Mandates that the rule of taxation shall be uniform and equitable, and Congress shall evolve a progressive system. Basis for substantive challenges to the VAT law's fairness and impact.
• 1987 Constitution, Article VI, Section 28(2) (Delegation of Tariff Powers) — Allows Congress to authorize the President to fix tariff rates, quotas, etc., within specified limits. Cited by petitioners to argue that delegation of power to fix VAT rates is not covered.
• 1987 Constitution, Article III, Section 1 (Due Process and Equal Protection) — Guarantees that no person shall be deprived of life, liberty, or property without due process, nor denied equal protection. Basis for substantive challenges against the input tax limitations and withholding tax.
• National Internal Revenue Code (NIRC) of 1997 (as amended by R.A. 9337):
  • Sec. 106 (VAT on Sale of Goods/Properties) — Amended by RA 9337, Sec. 4 (imposing 10%/12% VAT rate with standby authority).
  • Sec. 107 (VAT on Importation) — Amended by RA 9337, Sec. 5 (imposing 10%/12% VAT rate with standby authority).
  • Sec. 108 (VAT on Sale of Services/Lease) — Amended by RA 9337, Sec. 6 (imposing 10%/12% VAT rate with standby authority).
  • Sec. 110(A)(2) & (B) (Creditable Input Tax) — Amended by RA 9337, Sec. 8 (imposing 60-month amortization and 70% cap).
  • Sec. 114(C) (Withholding VAT) — Amended by RA 9337, Sec. 12 (imposing 5% final withholding VAT on government payments).
  • Sec. 27, 28, 34 (Income Tax) — Amended by RA 9337, Secs. 1, 2, 3 (revising corporate income tax rates and deductions).
  • Sec. 116, 117, 119, 121, 125 (Percentage Taxes) — Amended by RA 9337 (adjusting rates or removing taxes).
  • Sec. 148, 151 (Excise Taxes) — Amended by RA 9337 (adjusting rates).
  • Sec. 105 (Persons Liable for VAT) — Defines VAT and mentions tax shifting.
  • Sec. 112 (Refunds/Tax Credits of Input Tax) — Defines conditions for refund/credit.

• Carpio, J. — Concurred with the majority opinion.
• Panganiban, J. — Concurred with the majority on most points but dissented regarding the constitutionality of Sections 1, 2, and 3 of RA 9337 (amending NIRC income tax provisions), arguing they were not germane to the VAT-focused House bills and thus violated the origination clause (Art. VI, Sec. 24). He found the standby authority not an undue delegation and the input tax limits constitutional as Congress can modify statutory privileges. He emphasized that judicial review extends to constitutional violations in enactment, not just internal rules.
• Azcuna, J. — Concurred but argued the rate increase was effectively unconditional as one of the two conditions was certain to happen. Found the non-VAT amendments (corporate income tax) not germane and thus unconstitutional, agreeing with Davide and Panganiban on this point.
• Chico-Nazario, J. — Concurred fully with the majority opinion, upholding the enrolled bill doctrine and finding the BCC acted within its authority and the amendments were germane to the purpose of raising revenue.

• Davide, Jr., C.J. — Dissented in part. While yielding on the germaneness rule's application from Tolentino to VAT-related amendments, he argued that amendments to non-VAT provisions (income tax, percentage tax, franchise tax, excise tax - Secs. 1, 2, 3, 14, 15, 16, 17, 18 of RA 9337) violated the origination clause (Art. VI, Sec. 24) as they were not covered by or germane to the House bills which dealt only with VAT.
• Puno, J. — Dissented on several points. Argued that the issue of the standby authority (Secs. 4-6) was not ripe for adjudication. Voted to declare unconstitutional the deletion by the BCC of the "no pass on provision" concerning electricity, arguing the BCC exceeded its power to merely reconcile differences when both houses agreed on the prohibition. Also found Section 21 (restrictions on LGU use of incremental revenue) unconstitutional as an extraneous BCC insertion. Argued for re-examining the broad "germaneness" test from Tolentino and strictly limiting BCC powers.
• Sandoval-Gutierrez, J. — Joined Justice Puno's dissent. Additionally argued that the standby authority (Secs. 4-6) was an undue delegation of legislative power and violated due process, as the conditions were malleable by the President and the reward system was arbitrary. Argued that the Senate Bill did not truly originate from the House Bills. Declared multiple sections unconstitutional based on these points and joined the dissent on the "no pass on" provision deletion.
• Tinga, J. — Dissented regarding the constitutionality of Section 8 (70% input tax cap and 60-month amortization) and Section 12 (5% final withholding VAT), arguing they violate the due process clause as they are arbitrary, confiscatory, destructive to small/medium enterprises, and effectively impose double taxation on government transactions. Found Section 21 unconstitutional for violating germaneness. Concurred with denying petitions challenging other sections (like standby authority and origination of VAT amendments).
• Carpio-Morales, J. — Concurred with Justice Tinga's dissent regarding Section 8 (input tax limitations).
• Callejo, Sr., J. — Joined Justice Puno's dissent, particularly voting to declare the deletion of the "no pass on provision" unconstitutional.
• Ynares-Santiago, J. — (On leave but participated in deliberations) Joined Justice Puno's dissent, arguing the BCC cannot introduce entirely new provisions or substitute its judgment for that of Congress, violating the three-reading and no-amendment rules.
• Garcia, J. — Concurred with Justice Puno regarding the unconstitutionality of deleting the "no pass on provision" (including Sec. 21).