More of the same? Debate begins on the inclusion of IBS/CBS in the ICMS tax base

In recent weeks, the states of Pernambuco and São Paulo, as well as the Federal District, have taken a stand in favor of including the IBS (Tax on Goods and Services) and CBS (Contribution on Goods and Services) in the ICMS tax base, on the grounds that the new taxes would make up the value of the transaction.

For the time being, this position would only take effect from 2027, since in 2026 there will only be the introduction of rates for the purposes of ancillary obligations.

The new position rekindles old discussions and raises a warning to taxpayers: litigation is on the horizon!

Between 2027 and 2032 the IBS, CBS and ICMS will coexist in a transition period to the new regime. However, what was supposed to bring a new air of neutrality already seems to be the return of old debates about how the tax base should be calculated, with an apparent desire by the states to return to the whole logic of taxation from within that was intended to be removed in the new system.

Complementary Law 214/2025, which regulates the Tax Reform, expressly states that ICMS, as well as other taxes such as ISS, IPI and PIS/Cofins, will not be part of the calculation basis for IBS and CBS.

However, the opposite does not seem to be true.

Initially, the bill that gave rise to Constitutional Amendment 132/2023, which is the basis of the Tax Reform, expressly stated that IBS/CBS are not part of the ICMS calculation base. However, in the text approved and currently in force, there is no such express provision and, for this reason, the states defend the inclusion of IBS and CBS in the ICMS tax base.

According to the Federal District, for example, the absence of a legal provision regarding the exclusion of IBS and CBS would demonstrate the impossibility of providing for a diminishing hypothesis of the calculation basis not expressly provided for in the law in force.

It is worth mentioning that Bill 16/2025, currently before the Chamber of Deputies, aims to amend the wording of Complementary Law 214/2025 and expressly provide for the exclusion of IBS and CBS from the ICMS, ISS and IPI tax bases. However, there has been no movement on the bill since April 2025.

It is too early to make predictions about the position of the other states. The media has already publicized the existence of decisions denying injunctions to exclude IBS and CBS from the ICMS, ISS and IPI tax bases on the grounds of lack of legal basis and irreparable damage.

If the aim of the tax reform is to avoid distortions and promote simplicity and transparency, this discussion goes completely against the grain. The indications are that if the states don’t change their new position or the judiciary doesn’t analyze the issue in depth, we run the risk of experiencing more of the same during the transition over the next few years.