The State has been sued following the reintroduction of the 16 percent value added tax (VAT) on cooking gas, sending the price of the commodity to a six-year high.
Energy Dealers Association has filed a petition at the High Court seeking to freeze implementation of the tax.
Households are paying at least Sh400 more for the 13-kilogramme cooking gas that is retailing at an average Sh2,650, a price level last seen in March 2015.
This is line with the Finance Act 2019 that reinstated VAT on liquefied petroleum gas (LPG), but delayed the levy for one year to July 1 due to concerns about the cost of living.
The lobby reckons the effects of Covid-19, including job cuts and freeze in salary increases necessitate another one-year delay.
The association says the new tax will make cooking gas unaffordable and force some dealers to close shop on low demand for LPG.
They are apprehensive that many Kenyans will shy away from using LPG and shift to dirty kerosene and charcoal for cooking.
“The change in consumers’ character will have the ripple effect of affecting the small and medium clean cooking gas enterprises as the decrease in demand of their products may make their business models less commercially viable,” reads the petition.
“Amidst the Covid-19 pandemic, most businesses in the cooking sector have already experienced financial and operational challenges, forcing some of them to close, limit their production and lay off workers. An introduction of the VAT on cooking gas will only make the situation worse.”
Pending the determination of their petition, the association wants court to issue a temporary order freezing a section of the Finance Act that reintroduced the LPG tax. The petition will be mentioned on July 13 before Justice Anthony Mrima.
Kenyan households have since June 2016 been enjoying low cooking gas prices after the Treasury scrapped the tax on LPG to cut costs and boost uptake among the poor.
Prices for the 13-kilogramme cooking gas fell to below of Sh2, 000 in October 2016 after the Treasury scrapped the 16 percent VAT.
The LPG prices are not controlled like other petroleum products and the new tax will fuel fears that dealers could exploit the market forces to their advantage, even as international crude prices continue to rise.
The energy regulator in 2010 started controlling prices for diesel, petrol and kerosene to cushion consumers from high prices, blaming cartel-like behaviour among dealers.
Cooking gas was left to the market forces of supply and demand.
National Assembly Speaker Justin Muturi backed the House committee that rejected proposal to delay the tax, saying it would derail revenue collections and hurt financing of development in the year to next June.
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Note: The results are not exact but very close to the actual.
