The Federal Laws n. 10.637/2004 and 10.833/2003 establish that a company may offset social contribution (PIS and COFINS) credits, calculated in relation to goods and services acquired to be used as inputs in the rendering of services, in the production and/or manufacture of goods and products destined to sale.
However, the referred laws do not define the concept ofthe term input’,which has been resulting in a variety of different interpretations on administrative and judicial instances. Despite this controversy, the Superior Court of Justice (STJ) has recently decided that‘input’, for the purposes of interpreting the aforementioned laws, should encompass any goods, materials, rights or services, directly or indirectly applied in the manufacturing process or in the rendering of services, if considered as an essential component of such, and not only the raw materials acquired by the company.
In practice, given the principle of essentiality applied by the STJ, the concept of ‘input’ will be assessed case by case, observing the business activity, as well as the importance (essentiality) of the input in the manufacturing process or the rendering of services, so the company can profit from the recovery of credits (by offset) granted by the referred laws.
Provided that, most companies are not aware of such coverage of the term ‘input’, many register the parametrization in the Enterprise Resource Planning (ERP) system considering only raw materials as to recover credits by offset, disregarding potential other inputs, which ultimately results in the increase of the cost of the final products/services to be sold/performed.