Thanks to the approved Finance Act of 2016, motorists have a two-year deferment of value added tax on petroleum products.
The VAT Act in 2013 had given a grace period of three years of VAT on fuel products which included petrol, diesel and jet fuel.
Treasury Secretary Henry Rotich said in his budget speech in June that the tax would be deferred for one year. It has however been extended to two years.
This means that fuel price increase that would have seen pump prices rise above KSh 100 per liter will take effect in September 2018 at the earliest.
Secretary-General of the Consumer Federation of Kenya Stephen Mutoro commented on the deferment, saying it was good news for consumers. He however added that VAT on fuel needs to be scrapped entirely.
“Any measure to remove or delay (the tax) will have a positive multiplier effect by making fuel affordable for motorists and pulling down inflation.”
“We have always asked the president to lower the cost of living and fuel, which attracts the highest taxes in the country, should be a good starting point. High fuel prices affect transport, trade and manufacturing.”
The price of fuel plays a major role in determining the cost of goods in the market.
Transportation, running and operating machinery would be among the everyday activities that would be affected if the deferment was not implemented.
Fuel is also among the most heavily taxed items with about 42 percent of a liter of petrol going to the State as tax.
Motorists and the average Kenyan would benefit from the Finance Act as the government aims to help better the lives of its people.