Cooking gas, solar product prices to rise on felled Finance Act 2023
Should the Finance Act, 2023 be abandoned, an 8 percent VAT on cooking gas would be reintroduced in line with the Finance Act, 2022, increasing prices.
The Finance Act of 2023 had zero-rated Value Added Tax (VAT) on LPG, which helped bring down the cost of the product as the State moved to promote clean cooking.
“By zero-rating VAT on Liquefied petroleum gas (LPG), it is expected that this will reduce the cost of LPG and positively impact the climate through the use of clean energy. Input VAT incurred by the suppliers of LPG will now be claimable,” said tax experts at KMPG on the impact of the Act when it was enacted last year.
According to data from the Kenya National Bureau of Statistics, the cost of a 13-kilogramme cylinder of LPG has increased by 6.2 percent this year.
It was retailing at an average price of Sh3,032 in December 2023 but had risen to Sh3,221 in May.
The court’s decision will also have a major impact on the cost of solar photovoltaic (PV) components and lithium-ion batteries as well as electric mobility.
The Finance Act 2023 had zero-rated the supply of electric bicycles, solar and lithium-ion batteries, and electric buses to incentivise the uptake of renewable energy and promote e-mobility.
This was a big relief for e-mobility and solar firms, who were paying the standard 16 percent VAT on these products under the Finance Act 2022.
On the flip side, the Finance Act 2023 doubled VAT on petroleum products (excluding LPG) from 8 percent to 16 percent. This significantly raised the cost of fuel, and therefore the cost of living and doing business.
Resetting the tax to 8 percent is expected to cut more than Sh10 per litre.
