Kerosene, cooking gas and travel to cost more in VAT regime
Raising the cost of kerosene and cooking gas will hit households that use the two for cooking and lighting. PHOTO | FILE
What you need to know:
The prices of fuel, kerosene, cooking gas and jet fuel will go up by 16 per cent following the expiry of a three-year period when they were exempted VAT.
The price increases will have a ripple effect on household budgets and raise transportation costs for individuals and businesses.
Motorists, households and airlines are set to feel the pinch from September when the government starts levying value added tax (VAT) on fuel, kerosene, cooking gas and jet fuel.
The prices of these items will go up by 16 per cent following the expiry of a three-year period when they were exempted from the tax in what look set to deny Kenyans the benefits of rock bottom crude oil costs.
The price increases will have a ripple effect on household budgets and raise transportation costs for individuals and businesses.
“The following goods shall be exempt supplies for a period of three years from the commencement of this Act unless the exempt status of the supplies is earlier revoked,” the VAT Act which commenced on September 2, 2013 says.
The increase in fuel prices will be the third in the space of 15 months highlighting the burden that the Jubilee government has placed on motorists to fund its growing budget.
The government imposed an additional Sh3 per litre of fuel in road maintenance levy in the June national Budget. In December, the excise duty on diesel increased from Sh8.24 per litre to Sh10.3 per litre.
Currently, diesel- used for powering industries, trucks, buses and agricultural machinery retails at Sh78.51 per litre in Nairobi while petrol is going for Sh90.06.
These prices are as a result of a fall in global crude oil prices which have plummeted from over $100 per barrel in 2014 to as low as $37 last month.
Crude oil prices are expected to remain low in 2016. French oil company Total and investment bank Goldman Sachs are among numerous bodies predicting low prices as the current supply glut continues.
The US Energy Information Administration forecasts that crude oil prices will average $56 per barrel this year.
Consumer Federation of Kenya (Cofek) Secretary-General Stephen Mutoro told the Business Daily that they are lobbying MPs to have the VAT implementation for these items pushed forward in light of the current high cost of living.
Cofek is counting on 2016 being an electioneering period to have Parliament pass the pro-consumer extension.
“But in the event that Parliament fails, we are also looking at applying for a judicial interpretation on whether the government is contravening consumer rights by making it impossible for people to afford the goods,” Mr Mutoro said.
In February, 2015, Treasury wrote to the International Monetary Fund pledging to abolish VAT exemptions on oil products by August this year.
“This measure is expected to increase VAT revenue by about 0.3 per cent of GDP per year,” Treasury said in a document sent to the IMF.
Raising the cost of kerosene and cooking gas will hit households that use the two for cooking and lighting.
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