VAT review to lower costs of goods

The price of a number of essential goods is set to come down with commencement of new Value Added Tax ( VAT) law. The amendment Act, which was assented to by President Uhuru Kenytta on May 8, came into effect last Thursday and will make exempt a number of items that have since last year in September been subject to a 16 per cent VAT. The move is expected to see prices of such goods as animal feeds, mosquito nets, air travel services and solar power accessories start coming down in the absence of the 16 per cent VAT. Suba MP John Mbadi tabled the VAT amendment Bill in Parliament in March this year. It was aimed at reducing the price of basic goods and services. Other goods that will now be VAT exempt include aircrafts, fishing nets and pharmaceutical products. Basic products The VAT Act 2013 came into force in September last year and resulted in a rise in the cost of basic products such as milk and bread, before the Kenya Revenue Authority issued a clarification that excluded some of the items from VAT.
Other than consumers that decried the high cost of products, different industry players also said they were taking a hit as in addition to their products being within the VAT bracket, they would also pay VAT on raw materials and inputs, which would push up the retail price of their products. Among the industries that have argued against imposition of VAT on their products and services include tourism. The VAT Act 2013 roped into the VAT bracket a host of services within the industry including tour operator services, air travel services and aircrafts.
The industry says this has had the impact of driving some of Kenya’s business away.