Beauty industry let off as KRA keeps back stamp duty raise

Millions of consumers of cosmetics and beauty products in the country have been spared from paying more for the goods they use to boost appearances after the taxman postponed indefinitely the move to quadruple stamp duty.

Kenya Revenue Authority (KRA) was to roll out excise stamps for the products on July 1 in line with the Excise Duty (Excisable Goods Management System- EGMS) (Amendment) Regulations, 2023, that was published early in the year.

However, KRA in a Tuesday notice said it had put on hold the move that would have seen the levies for beauty and cosmetic products jump from Sh0.6 to Sh2.5 per stamp, a 316 percent increase.

KRA says it has decided to reschedule the rollout date to allow for “adequate preparation” by the manufacturers and importers and to address issues that were raised during the stakeholder engagement stage.

“KRA, therefore, wishes to inform manufacturers, importers and other stakeholders involved in the distribution and supply of cosmetics and beauty products that the rollout has been rescheduled to a later date which shall be communicated in due course,” said KRA.

The development offers a double reprieve for players in the beauty industry who were last month also spared from a five percent excise duty on wigs, false beards and eyebrows that had been proposed in the Finance Bill 2023.

Read: The burden of beauty: Wigs, false beards and eyebrows hit with 5pc tax

The Bill was also seeking to introduce the tax on human hair eyelashes, switches and artificial nails in a move that would have resulted in price increases for these beauty products whose usage is on the rise.

The proposal was, however, dropped by MPs and the changes were endorsed by Parliament in a document that was later assented to by President William Ruto.

Read: Close shave for beauty industry in tax drop plan

These items, which are mostly imported, have grown in popularity alongside the use of cosmetics, which the State is already taxing.

Official data show the industry has grown by over Sh10 billion over the past decade as more Kenyans embrace the use of makeup and other beauty products.

Imports of essential oils and perfumes alone rose from Sh22.86 billion to Sh27.18 billion between 2018 and 2022, data from the Kenya National Bureau of Statistics show.

The taxman’s growing interest in the industry reflects a rapid growth that has been witnessed — both in local manufacturing and imported products— that provide a new revenue stream for a government keen to grow taxes.