Agro-chemical manufacturers have softened their stand, asking for a lower VAT rate after they failed to lobby MPs out of plan to exempt import of farm inputs.
The Agrochemicals Association of Kenya (AAK) has warned that an exempt status on agricultural pesticides would pose a threat to food security and kill the local manufacturing sector.
The Government has proposed exempt status for agricultural pesticides through the Finance Bill 2019 currently under review despite insiders’ call for zero-rating.
Zero-rating allows dealers to reclaim all their input VAT charged at a standard rate of 16 per cent as opposed to suppliers of exempt goods who cannot get such refunds.
“Our prayer is that agricultural products be zero rated so the benefits can be passed on to farmers, the people responsible for our food security,” said AAK chairperson Patrick Amuyunzu.
He told Parliament tax-exempting the farm inputs will mean that locally formulated products will be pricier than imported ones.
“This will disadvantage local manufacturers as farmers would opt to import ready finished products. This will lead to a shut-down of companies and result in unemployment,” he said.