If a manufacturer uses another kind of tobacco or alcohol product as raw materials for the production of its tobacco or alcohol products, it shall fill out a Material Computation Form for the materials required and apply to the competent tax authority for approval. If the competent tax authority deem there is a need to prescribe an uniform standards for the use of said materials, after sending samples of the tobacco and alcohol products to a testing agency for checking, the competent tax authority should submit a request to the Ministry of Finance for the formulation of such standards.
A taxable material shall be exempted only if it constitutes an ingredient of the tobacco or alcohol product; materials used for fueling and testing purposes shall not be exempt from tobacco and alcohol tax.

When purchasing another kind of tobacco or alcohol product to be used as material for the manufacture of tobacco or alcohol products, the manufacturer shall apply to the competent tax authority for approval of tax exemption on tobacco and alcohol tax by submitting an Application for Tax Exemption of Materials in triplicate. The first copy of the application will be kept by the competent tax authority, and the other two copies of the application will be arranged according to the following provisions after they have been signed:
(1)If the taxable materials are purchased or acquired directly from a local supplier, the manufacturer will give both copies of the application to the supplier. After filling out the factory delivery sheet as required, the supplier will retain the second copy and submit the third copy, on which then will be recorded the actual ex-factory quantity and date, to the local competent tax authority in the following month when filing the monthly return.
(2)If the taxable materials are imported, the manufacturer will give both copies of the application to the Customs for exempting from tobacco and alcohol tax. After releasing the goods, the Customs will keep the second copy and send the third copy, after it is noted with the actual quantity and date of release, to the competent tax authority where the manufacturer is located.
(3)If the taxable materials are supplied by the manufacturer itself, the manufacturer may keep the second copy of the application and send the third copy, after it is noted with the actual quantity and date of release, to the competent tax authority where the manufacturer is located for future reference.
After purchasing or acquiring tax-exempt materials, the manufacturer should immediately post the entry on its tax-exempt material register.

A manufacturer may not supply tax-exempt materials to other factories without the prior approval of the competent tax authority.

If a manufacturer does not follow the tax exemption procedures according to Article 31 herein and instead uses taxed tobacco or alcohol products to manufacture other tobacco and alcohol products, no tax or surcharge will be refunded.