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The Kenya Forum | VAT on Cooking Gas is Betrayal to Wananchi - The Kenya Forum

July 30, 2021

Summary

For the ordinary mwananchi struggling to make ends meet, anything that adds another additional cost to basic expenses becomes another source of headache.

More by Winnie Kabintie

VAT on Cooking Gas is Betrayal to Wananchi

VAT on Cooking Gas is Betrayal to Wananchi

Kenyan Households have since June 2016 been enjoying low cooking gas prices after the Treasury scrapped the tax on Liquified Petroleum (LPG) in an effort to lower the cost of living and promote the use of clean energy.

In 2017, the government in an effort to protect the environment by cutting over-reliance on firewood and kerosene in poor households introduced a gas cylinder subsidy, Gas Yetu, that sought to provide an alternative safe and affordable source of fuel.

The “Gas Yetu” initiative, which was rolled out through the state-owned National 0il company saw consumers purchase a complete 6kg gas cylinder at a subsidized cost of Sh 2000 down from Sh 5000 while refill of the same was set at Sh 900 at licensed Gas Yetu retail outlets.

The initiative, codenamed the mwananchi gas project was laudable and it saw dozens of households in poor communities for the first time own a gas cylinder, seeing that it made it cheaper and more convenient and as the beneficiaries would say “a taste of class” as well.

Through the Mwananchi Gas Project, the government sought to enhance LPG penetration from approximately 10% currently to 70% within the next 3 years and National Oil said it was working on a robust distribution model that will enable Wananchi in all the counties access LPG at the nearest shopping center through licensed distributors and retailers.

I cannot authoritatively comment on the success of the project and if at all it’s still running and on what terms, but going by the re-introduction of value-added tax (VAT) on liquefied petroleum gas (LPG), that took effect of July 1st 2021, it’s unlikely that beneficiaries will still pay sh 900 for refill.

ACT OF BETRAYAL?

In July 2021, the cost of cooking gas went up by Ksh 350 following the government’s introduction of value-added tax (VAT) on LPG. Currently, the price of 13kg gas cylinder is going for Ksh2500 up from Ksh 2200.

This will also have a ripple effect on the cost of energy like fuel and electricity.

Critics have also warned that that the introduction of VAT on LPG is ill-timed saying it will disrupt the exponential growth in LPG penetration over the year.

Last year, the annual per capita consumption increased to 6.7 metric tonnes from 2.3 metric tonnes in 2009. In 2012, there were only nine LPG filling plants in the country but as 2021 July, we have 105. The number of LPG brand owners has also grown from nine in 2009 to 82 in 2021.

The number of investors in LPG terminal and storage facilities has also been growing.

The re-introduction of VAT on cooking gas is in line with the Finance Act 2020 that reinstated value-added tax (VAT) on liquefied petroleum gas but delayed the levy for one year (July 2021) due to concerns about a high cost of living.

The Finance Act2020 (the Act) was passed by the National Assembly on 23 June 2020 and assented to by the President on 30 June 2020.

According to KPGM, “the Finance Act introduced fundamentally different tax concepts in the country such as a minimum tax primarily targeting taxpayers in a perpetual tax loss position, Digital Services Tax and a “go-and-sin-no-more” provision through the introduction of a Voluntary Tax Disclosure Programme that provides for a waiver of penalties and interests”.

For the ordinary mwananchi struggling to make ends meet in the covid-19 economy, amid a high cost of living, increased school fees, job losses and reduced earnings, anything that adds another additional cost to basic expenses has become another source of headache, quite literally.

Related

https://www.kenyaforum.net/economy/wananchi-to-feel-the-pinch-of-increased-excise-duty-on-mobile-loans-and-airtime/

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