The basis for calculating the ISS is the price of the contracted construction service. From this, it is only possible to deduct the value of the material used if it was produced by the service provider outside the construction site and if it was sold by the service provider with the incidence of ICMS.
With this understanding, the 1st Panel of the Superior Court of Justice confirmed the pacification of a tax controversy that lasted a decade, but recently came to an end through a decision of the Supreme Federal Court.
The case under review involves the interpretation of Article 9, paragraph 2, item “a”, of the Decree-Law 406/1968, the rule that establishes the calculation basis for the provision of certain services, including those in the construction industry (items 19 and 20 of the list attached to the law).
These items include the caveat that the supply of “goods produced by the service provider outside the place where the work is performed, which are subject to ICMS”, does not fall within the ISS base.
This section would allow for two interpretations. One of them, more favorable to the taxpayer, indicates that the ISS does not cover the value related to any merchandise, whether produced at the place where the service is provided or outside it.
The other, pro-Tax Authority, states that the ISS deduction only applies to goods produced by the service provider outside the place where the services are provided and are subject to ICMS. This has been the position historically adopted by the STJ Public Law panels in several precedents.
The problem is that, in 2010, the discussion reached the Supreme Federal Court, in RE 603.497. The rapporteur of the matter, Minister Ellen Gracie (now retired) granted the appeal to reinstate the sentence and allow the appellant company to deduct from the calculation basis the values of the materials used for concreting.
This single-judge decision was valid for a decade. During this period, the Supreme Court indicated that the STJ's interpretation was outdated. This position was overturned in 2020., what if confirmed last year, as shown by the electronic magazine Consultor Jurídico.
According to Minister Regina Helena Costa, the STF ended up preserving the jurisprudential orientation that the STJ established in the infra-constitutional scope: the impossibility of deducting the materials used from the calculation basis of the ISS levied on civil construction services.
“The construction service provider is, as a rule, a taxpayer only of the ISS, so that, even if he himself produces the materials used outside the construction site, these materials will not be subject to ICMS collection, and, therefore, cannot be deducted from the ISS calculation base”, explained the rapporteur of the special appeal.
“However, if the construction service provider is also an ICMS taxpayer, the materials necessary for construction produced by him outside the construction site and sold in parallel with the contractor, as they are subject to state tax, may be subtracted from the ISS calculation base,” she added.
In the case tried by the 1st Panel of the STJ, the taxpayer's special appeal was denied because the company did not allege, much less prove, that it sold the materials used in the concreting services separately and subjected their value to ICMS taxation. The vote was unanimous.
Click here to read the judgment
REsp 1.916.376
Source: https://www.conjur.com.br/2023-mai-05/nao-compoem-base-iss-materiais-sujeitem-icms