The State will import 30 percent of cooking gas through the National Oil Corporation of Kenya in a move aimed at controlling the price of the commodity. PHOTO | CYRIL NDEGEYA | NMG
KRA had petitioned Parliament to retain the tax on grounds that its reduction to eight percent would see it lose out on Sh4.02 billion in revenue in the year to June.
The National Assembly Committee on Finance and National Planning rejected the proposal, saying it risks pushing the commodity out of reach of households.
Kenya is banking on the removal of the VAT and price controls after completion of the Kipevu Oil Terminal to lower the price of cooking gas and boost uptake.
Kenya Revenue Authority (KRA) has lost a bid to retain the 16 percent tax on cooking gas in changes to the law aimed at making the commodity affordable.
The KRA had petitioned Parliament to retain the tax on grounds that its reduction to eight percent would see it lose out on Sh4.02 billion in revenue in the year to June.
The National Assembly Committee on Finance and National Planning rejected the proposal, saying it risks pushing the commodity out of reach of households.
“Retain the value-added tax (VAT) rates for petroleum products and LPG as they currently are. The reduction of the VAT rate on the products will have an adverse revenue impact on the government,” KRA said in its petition.
The reduction of the VAT on cooking gas is contained in the Petroleum Products (Taxes and Levies) Amendment Bill, 2021 passed by the committee and awaits house approval to become law. The push to lower the tax on cooking gas comes barely six months after its re-introduction that prompted prices to shoot up.
The price of the 13-kilogramme shot to Sh2,800 in September from Sh2,000 in June, highlighting the adverse effects of the tax.
The Treasury had scrapped VAT on cooking gas in June 2016 to cut costs and spur uptake of clean fuel in place of kerosene and charcoal.
Cooking gas prices stood at an average Sh2, 231 in June 2016, and dropped to below Sh2, 000 in October four months after the scrapping of the 16 percent VAT.
Unlike the fuel prices, which are adjusted on the 15th of every month and stay in place for one month, the government does not control cooking gas prices.
Kenya is banking on the removal of the VAT and price controls after completion of the Kipevu Oil Terminal to lower the price of cooking gas and boost uptake.
The facility will have a common-user berth for handling LPG will allow the State to issue an open tender system (OTS) for gas imports, prompting the shift to control of cooking gas prices.
Under the OTS, the ministry will award one oil marketer the right to import gas in bulk every month on behalf of the entire industry, enjoying huge discounts like the case with other fuels.
Lack of a common-user State facility at Kipevu has locked out firms from handling cooking gas imports at the Port, with only one company handling over 90 percent of the LPG shipments.
