The 1st Section of the Superior Court of Justice (STJ) has determined, in the judgment of RESP 1,896,678/RS and 1,958,265/SP (Topic 1125), that the Tax Substitution (ICMS-ST) should not be included in the calculation bases for PIS and Cofins. This decision was made under the system of repetitive appeals, which implies that the decision should be applied by courts throughout Brazil and by the Administrative Council for Tax Appeals (Carf) in similar cases.
In the tax substitution regime, a taxpayer is responsible for advancing the payment of ICMS on behalf of other participants in the consumption chain, simplifying the monitoring of compliance with this tax obligation. In the context of this judgment, the substituted party, i.e., the one who comes later in the tax chain, argued that the ICMS-ST collected in the previous stage should not be considered as part of the cost of purchasing goods that are resold to the final consumer and, therefore, should not be part of the calculation bases for PIS and Cofins.
The ministers of the STJ based their decision on the jurisprudence of the Supreme Federal Court (STF), specifically in the judgment of RE 574,706 (Topic 69) in 2017. In that case, the STF established that ICMS is not part of the calculation bases for PIS and Cofins, arguing that it does not become part of the taxpayer’s assets, does not represent revenue, and therefore should not be considered as part of the calculation bases for these contributions, but rather as a mere inflow to public coffers.
The rapporteur, Minister Gurgel de Faria, argued that, just as the STF definitively decided in the “case of the century” that ICMS is not part of the calculation bases for PIS and Cofins, the same reasoning should be applied to ICMS-ST. In addition, the rapporteur emphasized that the institution of the tax substitution regime is a prerogative of state or district laws. Therefore, allowing a distinction in the calculation bases for PIS and Cofins between regular ICMS and ICMS-ST could compromise the federal pact and create room for a kind of heteronomous exemption.
The ministers thus defined the following thesis: “ICMS-ST does not comprise the calculation bases for PIS and Cofins owed by the substituted taxpayer in the progressive tax substitution regime.”
In summary, this decision constitutes an important milestone in Brazilian jurisprudence on tax matters. By establishing that ICMS-ST should not be included in the calculation bases for PIS and Cofins, the court followed the line of argumentation already consolidated by the Supreme Federal Court (STF) in the judgment of RE 574,706 (Topic 69), reinforcing legal coherence between the higher courts.