KRA losses battle with three drugmakers over Sh878.5m VAT claim

The Kenya Revenue Authority (KRA) has lost a protracted court battle with three pharmaceuticals over Sh878.5 million it was claiming in value added tax (VAT).

High Court judge George Odunga has stopped the taxman from demanding the colossal amount from Universal Corporation Limited, Cosmos Limited and Cooper K-Brands. The judge ruled that the taxman was wrong to demand the sum before giving the firms a fair hearing.

The drugmakers held that they were in 1995 granted tax amnesty on raw material used in the manufacture and packaging of medicine.

But the taxman insisted that they were not remitting taxes on raw materials which were not part of the exemption.

“Having considered the issues raised in this application, it is my view that on the ground of legitimate expectation, abuse of or wrongful exercise of power and irrationality the KRA’s decision cannot be allowed to stand,” the judge ruled.

“I hereby find that it would be contrary to justice to compel the applicant to pay the sum demanded by the respondent. To do so would be contrary to substantive fairness.”

In November 2013 the taxman asked the firms to settle unpaid VAT charges for imported goods running from January 2008 to October 2013.

The dispute erupted after KRA issued notices asking them to settle the arrears within 30 days. The taxman wanted Sh427.9 million from Universal Corporation, Sh288.8 million from Cosmos and Sh161.8 million from Cooper K-Brands.