The 5th Public Law Chamber of the Court of Justice of the State of São Paulo (TJSP) denied, last Thursday (13/4), the right of Usina Santa Isabel to pay a lower ICMS amount on the sale of raw sugar. By majority, the judges considered that the product does not make up the basic food basket — unlike crystal or refined sugar. Raw sugar is generally destined for industry and the foreign market.
The São Paulo ICMS Regulation establishes the reduction of the tax burden on internal transactions with basic food basket items, including crystal or refined sugar, a benefit considered by the manufacturer when issuing invoices for the sale of highly polarized raw sugar (VHP).
According to the company, it is a crystal type of sugar, suitable for human consumption, so it would be entitled to the tax benefit. A technical document produced by the Federal University of São Carlos (UFSCar) pointed to the same conclusion.
“The name 'Crystal Sugar' does not specify that the respective product is White Crystal Sugar. Crystal VHP and Crystal VVHP cane sugars, as long as they are produced in accordance with Good Manufacturing Practices (GMP), are suitable for human consumption. Although they may be commercially called Raw VHP Sugar and Raw VVHP sugar, technically they are Crystal sugars.”
For the São Paulo Treasury, the mill improperly applied the reduction in the tax burden established by law. VHP sugar, it argued, is not part of the basic food basket, considering that “its raw composition allows it to be transformed into different types of sugar for consumption and most of it is destined for the foreign market”.
Initially, the rapporteur selected, Judge Marcelo Martins Berthe, stated that there is no information demonstrating that the sugar sold would be used for purposes other than as part of the basic food basket. He concluded, therefore, that the tax benefit cannot be disregarded “based solely on assumptions.”
The judge also cited the content of the technical document, highlighting that “VHP sugar is suitable for human consumption and, therefore, can be part of the basic food basket, applying the tax benefit of reducing the calculation basis for determining ICMS”.
But the Speaker of the House, Maria Laura de Assis Moura Tavares, led the dissenting opinion, which won. According to the judge, even though it is classified as crystal sugar and suitable for human consumption, VHP sugar cannot be understood as the “crystal sugar” that makes up the basic food basket.
“Although there is no obstacle to VHP sugar being intended for human consumption, it is certain that it is not the type of sugar that is part of the basic food basket and is commercially known as 'crystal sugar', and the benefit of the reduction in the tax base cannot be extended to the transactions subject to the fine,” he stated.
“The tax benefit aims to relieve operations involving food items due to their essential nature, in order to reduce the cost for the end consumer,” so that “allowing the application of the reduction in the tax calculation basis to operations involving a type of sugar that is usually used as a raw material for industry would imply the distortion of the purpose of the tax benefit granted by the State,” he considered.
Two judges agreed with Tavares' vote. Judge Marcelo Martins Berthe and the judge who followed him were defeated. The case is being processed under number 1001747-59.2019.8.26.0306.