The Federal Supreme Court (STF) has scheduled February 5, 2021, for the trial of a highly relevant topic in the tax field: the discussion surrounding the possibility of state laws establishing higher ICMS rates for the supply of electricity and telecommunications services.
The issue, which has been dragging on for some years, had its general repercussion recognized by the STF (Issue 745), and will be decided within the scope of Extraordinary Appeal (RE) No. 714,139. In the case, authored by a relevant retail company, the constitutionality of the state legislation of Santa Catarina is being discussed, which established an increased ICMS rate of 25% (higher than 17% applicable to most transactions) levied on the supply of electricity and telecommunications services.
According to the arguments presented in the case records, the company questions the application of a higher rate on essential services (electricity and telecommunications), while state legislation provides for a rate of 17% for operations in general such as, for example, the sale of toys, cosmetics, jewelry and fireworks, considered superfluous.
In turn, the STF will decide whether, based on the essentiality of the goods and services in question, the state law would be violating constitutional principles of tax equality and selectivity of the state tax, in direct violation of the provisions of articles 150, II, and 155, § 2, of the Federal Constitution.
That is, the discussion is based on the impossibility of states establishing higher rates for essential services, since the application of the selectivity criterion, although provided for in the Federal Constitution, must be based on the essentiality of goods and services: the most essential must be subject to lower rates than those attributed to superfluous services.
It is important to emphasize that the decision will not only have an impact on companies that consume electricity and telecommunications services – due to the general repercussion of the matter – but it could also cause a blow to public coffers, if the STF declares the unconstitutionality of the provisions without the respective modulation of the effects.
