ICMS Applies to Additional Charges for Tariff Flags


The STJ (Superior Court of Justice) has ruled, by a majority of votes, with four in favor and one against, that the additional charge from the tariff flag system must be included in the calculation base for ICMS (Tax on Circulation of Goods and Services). The prevailing understanding was that tariff flags constitute the price of electricity and, therefore, should be part of the taxable base.

The rapporteur of the case, Minister Benedito Gonçalves, had his position supported by the majority of ministers, while Minister Regina Helena Costa presented a dissenting opinion regarding the adopted understanding. The tariff flag system was implemented in 2015 and uses colors (green, yellow, or red) to signal whether the cost of energy will be higher or lower according to generation conditions.

The judgment resumed after a request for review made by Minister Gurgel de Faria. In his vote, he endorsed the reasoning of the rapporteur’s vote. According to Minister Benedito Gonçalves, tariff flags are part of the price of electricity, referring to the production costs of what is consumed.

Furthermore, the minister stated that the costs of a commodity should be considered in the tax calculation. He argued that if there is a cost increase due to the tariff flag, these costs should be included in the ICMS calculation base.

On the other hand, the dissenting position of Minister Regina Helena Costa argued that tariff flags are not related to the actual consumption of electricity by the taxpayer and, therefore, should not be part of the ICMS calculation base.

In the final analysis, the ministers’ decision establishes an important precedent regarding the taxation of electricity, considering the different costs involved in its production and consumption.

Thus, electricity concessionaires will need to consider the additional value of tariff flags for the purpose of calculating the ICMS to be passed on to consumers. It is worth noting that this decision is specific to the context of tariff flags and ICMS and does not cover other aspects related to the taxation of electricity.


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