Upon judgment of Repetitive Special Appeal No. 1,201,635, the Superior Court of Justice recognized the right of telephone companies to register ICMS credits on the electric power acquired to render telecommunication services.

In the case judged, Telemig has filed a special appeal against a decision issued by the State Appellate Court of Minas Gerais, which had denied relief to the claim concerning the register of credits, under the argument that the telecommunication services are not characterized as an industrial activity. The company, in turn, sustained violation to the non-cumulativeness principle and to Complementary Law No. 87/96, since electric power is an essential input for telecommunication services and is transformed into electromagnetic impulses.

The taxpayer’s appeal was granted relief by majority of votes, under the terms of the vote issued by Reporting Justice Sérgio Kukina, based on the following grounds: i) The telecommunication activity consists of an industrialization process to which electric power is an essential input; ii) Decree No. 640/62 provided that telecommunication services are equivalent to basic industry, and this rule is compatible with the National Tax Code and with current rules, since it has not been expressly revoked; and iii) Section 19 of Complementary Law No. 87/96 provided that the ICMS must comply with the non-cumulativeness principle and that the offset must be made concerning each transaction, and this principle also applies to telecommunication services.

(REsp No. 1,201,635)