The decision recognized that a metallurgical company could classify graphite electrodes, a material that is gradually consumed during the production process, as an intermediate product.
For the purposes of generating ICMS credits on the purchase of goods by an industry, it must be analyzed whether the product used in the production process is raw material, which is used and becomes part of the final product, or material for use and consumption, which is not part of the industrialized product and is not consumed during the process.
When purchasing raw materials, the taxpayer has the right to take ICMS credits relating to the entry of the product to offset against the tax due when the final products are shipped out. As for materials for use and consumption, the legislation prohibits the taking of credits.
But what about production items that are not part of the final product, but are consumed in the production process?
The tax authorities generally maintain that there is only a right to ICMS credit on these products when they are consumed immediately and fully in the production process.
In a recent ruling by the São Paulo State Court of Justice, however, the court upheld an appeal filed by a steel company, recognizing that inputs consumed entirely in the production cycle generate ICMS credits, even if the consumption is not immediate and integral.
The decision emphasized that, even if there is no immediate and full consumption of the material purchased, ICMS credits are possible, as the use of the material in the manufacture of the final product is sufficient.
In this way, it is possible for metallurgical, chemical and construction industries, foundries, locksmiths and companies from a wide range of sectors to benefit from taking ICMS credits from inputs that are not consumed immediately and fully in the production process.
